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Wednesday, March 28, 2007
EUR/USD: Makes Marginal New High before Dip
USD/CAD made a marginal new high for the move at 1.3373 but was unable to sustain the new highs and quickly dipped back into the high 1.3350s. Dips have been limited thus far as EUR/JPY short-covering has helped cushion the pullback. It trades now at 1.3361.
USD/JPY: Trend Line Gives Ways As Bernanke Cites Uncertainties
USD/JPY's 116.65 trend line gives way as Bernanke cites uncertainties in the US economic outlook. The risk of a spillover from the housing market was also noted, underscoring the view that policy may need to be adjusted. Bernanke said that policy decisions would depend on both inflation and growth, yet stood by the view that the current stance fosters sustainable growth and ebbing core inflation.
Sellers in this move lower have included macro names and short-term speculative accounts. Japanese support has been healthy around 116.50 and this has reduced volatility and some of the downside pressure. Lower US yields should continue to work against this pair, increasing the pressure on the JPY carry trade.
Sellers in this move lower have included macro names and short-term speculative accounts. Japanese support has been healthy around 116.50 and this has reduced volatility and some of the downside pressure. Lower US yields should continue to work against this pair, increasing the pressure on the JPY carry trade.
EUR/USD: Bernanke Stays Balanced; Few Surprises
Bernanke was very balanced in his comments before the JEC, showing few additional jitters about the US economy despite the subprime mortgage woes of recent months. Subprime problems are contained while inflation remains uncomfortably high but moderating, he said. Stocks are tanking as hopes for a quick rate cut from the Fed fade once more. EUR/USD rallied to retest the 1.3370 area where central bank sellers have been rumored. A break targets the 1.3410 area. EUR/USD trades 1.3360.
GBP/USD: Revisits 1.9680 on Bernanke "Increased Uncertainties"
Cable has revisited 1.9680 on the back of Fed chairman Bernanke's comment that uncertainties around the US economy have "increased somewhat" (Reuters). 1.9680 offers capped earlier US durable goods orders data-fuelled gains. Further sell interest is tipped at 1.9700.
US ECON: Crude Inventories Down 0.9 Mln Brls; Gasoline dip
Crude oil inventories eased 0.9 mln barrels following two consecutive gains that pushed total inventories to their highest level in the year (329.3 mln). Crude supply is still lower than it was a year ago for the fourth straight week, off by 3.6%. Crude oil imports dropped to their lowest in three weeks while total petroleum product import rose to their highest level since the week of August 18. Following the news, May crude was up $1.67 at $64.50 a barrel.
Gasoline inventories dipped 0.3 mln barrels in the week ended March 24. This was the smallest of the seven straight 1-week decreases. Total motor gasoline inventories were down 0.1% but retail prices were up to their highest level since the September 9 week. Gasoline inventories were also 2.8% down from last year; the smallest one year drop in six weeks. Gasoline inventories have been lower from the year-ago level for seven consecutive weeks while consumption levels are higher from year ago levels by an average of 1.4%. Distillate inventories dropped by a small 0.7 mln barrels, down for the ninth straight week.
Distillate demand dropped 2.6%, a fifth straight drop. Residual fuel was off 11.9% and total petroleum product was down 2.5% after rising 1.6% in the prior week.
There were no additions made to the Strategic Petroleum Reserve. The ratio of SPR to market inventories was down to 2.091 from 2.116, the lowest this year.
Gasoline inventories dipped 0.3 mln barrels in the week ended March 24. This was the smallest of the seven straight 1-week decreases. Total motor gasoline inventories were down 0.1% but retail prices were up to their highest level since the September 9 week. Gasoline inventories were also 2.8% down from last year; the smallest one year drop in six weeks. Gasoline inventories have been lower from the year-ago level for seven consecutive weeks while consumption levels are higher from year ago levels by an average of 1.4%. Distillate inventories dropped by a small 0.7 mln barrels, down for the ninth straight week.
Distillate demand dropped 2.6%, a fifth straight drop. Residual fuel was off 11.9% and total petroleum product was down 2.5% after rising 1.6% in the prior week.
There were no additions made to the Strategic Petroleum Reserve. The ratio of SPR to market inventories was down to 2.091 from 2.116, the lowest this year.
US FED: Bernanke - Both Inflation and Subprime Likely Contained
The Fed Chairman is trying to soothe legislators on the potential threat of a spread in subprime lending woes. He also suggests inflation and inflation expectations are not feeding on themselves. That would leave policy unchanged despite overwhelming evidence that the economy is slowing with or without housing.
Bernanke told the Joint Economic Committee that current Fed policy is appropriate given the outlook for both economic growth and prices. He notes the slowdown in nonfarm business productivity in recent quarters but says the trend in worker efficiency remains constructive and likely to contain inflation. Core inflation remains stubbornly and "uncomfortably high," he offered.
Regarding his depiction of "solid" consumer spending, most disagree. Retail sales were anemic in the first two months of this year and net of gasoline should be equally disappointing in March.
At the heart of his testimony, distress in the subprime lending market increase concerns for the housing market but Bernanke told the Committee that the broader impact on prime lending and housing turnover is probably controlled.
The stock market seems to accept his remarks as a fairy tale; the Dow has doubled its losses prior to Bernanke's prepared remarks. Overseas bourses are widening their price declines in sympathy.
Bernanke told the Joint Economic Committee that current Fed policy is appropriate given the outlook for both economic growth and prices. He notes the slowdown in nonfarm business productivity in recent quarters but says the trend in worker efficiency remains constructive and likely to contain inflation. Core inflation remains stubbornly and "uncomfortably high," he offered.
Regarding his depiction of "solid" consumer spending, most disagree. Retail sales were anemic in the first two months of this year and net of gasoline should be equally disappointing in March.
At the heart of his testimony, distress in the subprime lending market increase concerns for the housing market but Bernanke told the Committee that the broader impact on prime lending and housing turnover is probably controlled.
The stock market seems to accept his remarks as a fairy tale; the Dow has doubled its losses prior to Bernanke's prepared remarks. Overseas bourses are widening their price declines in sympathy.
US TECHS: Commodities Outlook; Gold and Oil
The broad updraft in commodities has taken Apr [gold] right to its 62% retracement target at $670, with former weekly hurdles just below at $666-68 acting more as support. Next daily chart resistance is at $673-75, while weekly objectives are at $679.50-685.00.
Despite the big drop from late Feb, recent chart action has been quite favorable. Respect must be paid to the 62% test achieved today, that being the most important technical retracement level, so any stumble should be given heed but overall, chart structure is quite favorable. Intraday supports are very firm in the $663-65 band.
Bullish developments in [oil] certainly preceded the latest surge, with daily trends turning up days ago, and weeklies well on their way, just needing more time to confirm the shift. Prices are past their 200-day moving average at $64.35 May, and just below some important weekly hurdles at $65.20-25 and monthly targets just above at $65.65. Following yesterday afternoon's spike to just over $68, projected weekly resistance is now up at $67.80-68.80. For right now, intraday support is at $64.20-30.
Despite the big drop from late Feb, recent chart action has been quite favorable. Respect must be paid to the 62% test achieved today, that being the most important technical retracement level, so any stumble should be given heed but overall, chart structure is quite favorable. Intraday supports are very firm in the $663-65 band.
Bullish developments in [oil] certainly preceded the latest surge, with daily trends turning up days ago, and weeklies well on their way, just needing more time to confirm the shift. Prices are past their 200-day moving average at $64.35 May, and just below some important weekly hurdles at $65.20-25 and monthly targets just above at $65.65. Following yesterday afternoon's spike to just over $68, projected weekly resistance is now up at $67.80-68.80. For right now, intraday support is at $64.20-30.
Swiss Outlook (28th March 2007)
In the wake of the robust Swiss KoF numbers and the Franc has been underpinned. Economists had opted for a 1.83 reading but with February also revised higher (from 1.79 to 1.81) the latest Leading Indicator has surged to hit 1.90. As a result of these latest economic offerings and the mountain economy can expect further tightening in monetary policy into Q2 with a further 25bps hike now expected in mid-June from the SNB.
An upside surprise in the barometer was always likely to support the Franc dip and sellers in USD/CHF have since emerged to help weigh on spot. A return towards 1.2100 support is now looked for ahead of the North American open with stops still noted in play on any break into the 1.2090's. However, both US Durable Goods and Bernanke comments sit on the horizon for the Dollar.
Domestic players now look to the Swiss government's quarterly consumer sentiment forecasts, due Thursday at 05:45 GMT, to help support the CHF on dips. Both the solid UBS numbers and the robust KoF headlines should keep the market buoyant over potential official revisions.
An upside surprise in the barometer was always likely to support the Franc dip and sellers in USD/CHF have since emerged to help weigh on spot. A return towards 1.2100 support is now looked for ahead of the North American open with stops still noted in play on any break into the 1.2090's. However, both US Durable Goods and Bernanke comments sit on the horizon for the Dollar.
Domestic players now look to the Swiss government's quarterly consumer sentiment forecasts, due Thursday at 05:45 GMT, to help support the CHF on dips. Both the solid UBS numbers and the robust KoF headlines should keep the market buoyant over potential official revisions.
Sterling Outlook (28th March 2007)
Cable fell to two-day lows circa 1.9600 after the 09:30GMT disclosure of an unexpected UK Q4 GDP downward revision to +0.7% q/q. It was forecast at an unrevised +0.8% q/q. The UK Q4 current account deficit blow-out to GBP 12.7bn, from an upwardly revised GBP 10.5bn in Q3, also negatively impacted the pound. The Q4 C/A deficit was forecast at GBP 8.5/9.0bn.
The recovery rally from those circa 1.9600 lows has run into resistance ahead of 1.9635 (today's Asian session base). Upper obstacles include 1.9669 (today's Asian session peak), 1.9678, 1.9700 and 1.9725. Support points south of 1.9600 are noted at 1.9580 and 1.9560. Stops are tipped below both levels. Option-wise: more 1.9640 strikes, in an estimated GBP 500mn, roll off at today's NY cut (14:00GMT).
There was a GBP 250mn 1.9640 expiry yesterday. UK March house prices have risen by 0.4% m/m and 9.3% y/y, according to 06:00GMT-unveiled Nationwide data. Rises of 0.7% m/m and 9.6% y/y were forecast. Bernanke's Congressional testimony begins at 14:30GMT. US durable goods orders are due at 12:30GMT. Forecast: +3.5% m/m.
The recovery rally from those circa 1.9600 lows has run into resistance ahead of 1.9635 (today's Asian session base). Upper obstacles include 1.9669 (today's Asian session peak), 1.9678, 1.9700 and 1.9725. Support points south of 1.9600 are noted at 1.9580 and 1.9560. Stops are tipped below both levels. Option-wise: more 1.9640 strikes, in an estimated GBP 500mn, roll off at today's NY cut (14:00GMT).
There was a GBP 250mn 1.9640 expiry yesterday. UK March house prices have risen by 0.4% m/m and 9.3% y/y, according to 06:00GMT-unveiled Nationwide data. Rises of 0.7% m/m and 9.6% y/y were forecast. Bernanke's Congressional testimony begins at 14:30GMT. US durable goods orders are due at 12:30GMT. Forecast: +3.5% m/m.
Yen Outlook (28th March 2007)
USD/JPY and almost all the JPY crosses traded lower as speculative accounts pared positions. Much of the JPY outflows expected today were hedged out earlier this week, which disappointed those looking for gains in the wake of Uridashi issuance. EUR/JPY languished in the 157.40-50 area and the pair slipped into 156.25 after experiencing real money selling and speculative account activity.
Coupon and redemptions today helped weigh on EUR/JPY, although there was some interest on the other side relating to fresh issuance from Italy and Germany. USD/JPY, for its part, traded from 117.40 down to 117.20 after printing a 117.10 low in Asia. Bidding from Japanese importers continued but most of it was absorbed by spec long liquidation.
Retail investor demand was evident, with reports of bids trailing down to 116.90-117.00 support. The afternoon focus shifts back to Fed policy, with Fed Chairman Bernanke due to give a testimony to the joint economic committee. The recent shift in the FOMC language raises the stakes for today's testimony, while recent sub-prime woes and equity volatility will also be gauged.
Coupon and redemptions today helped weigh on EUR/JPY, although there was some interest on the other side relating to fresh issuance from Italy and Germany. USD/JPY, for its part, traded from 117.40 down to 117.20 after printing a 117.10 low in Asia. Bidding from Japanese importers continued but most of it was absorbed by spec long liquidation.
Retail investor demand was evident, with reports of bids trailing down to 116.90-117.00 support. The afternoon focus shifts back to Fed policy, with Fed Chairman Bernanke due to give a testimony to the joint economic committee. The recent shift in the FOMC language raises the stakes for today's testimony, while recent sub-prime woes and equity volatility will also be gauged.
Euro Outlook (28th March 2007)
Intraday and dealers note further 1.3300, 25 and 1.3350 option expiries at the NY cut-off (14:00 GMT). As a result, if spot continues to trade inside its rough short-term 1.3310/65 comfort-zone then no matter where the price sits prior to these expiries there could be a pull from the options market.
That said, 1.3400 and 1.3450 are still seen as key levels on the topside, despite the presence of 1.3250/3450 DNT exotic options. Into European trading and the latest failure ahead of 1.3360 opened the downside. Spot soon worked lower and mixed Euro Zone data did little to boost the hopes of a Euro bounce. Stops in the low 1.3320's continue to be targeted but talk of central bank and option related buyers into 1.3315 and 1.3300 respectively keeps the downside protected for the moment.
Looking ahead, US Durable Goods are set for release at 12:30 GMT but the North American session could the tale of the two central banks with both Bernanke and Trichet set to speak. The FOMC Chairman takes the floor first at 14:30 GMT with Trichet set to follow around 14:30 GMT.
That said, 1.3400 and 1.3450 are still seen as key levels on the topside, despite the presence of 1.3250/3450 DNT exotic options. Into European trading and the latest failure ahead of 1.3360 opened the downside. Spot soon worked lower and mixed Euro Zone data did little to boost the hopes of a Euro bounce. Stops in the low 1.3320's continue to be targeted but talk of central bank and option related buyers into 1.3315 and 1.3300 respectively keeps the downside protected for the moment.
Looking ahead, US Durable Goods are set for release at 12:30 GMT but the North American session could the tale of the two central banks with both Bernanke and Trichet set to speak. The FOMC Chairman takes the floor first at 14:30 GMT with Trichet set to follow around 14:30 GMT.
Tuesday, March 27, 2007
EUR/USD: Edging Higher, Talk Of Stops Above 1.3350
The EUR/USD is edging higher with the USD looking a bit soft in the afternoon session. The EUR/USD has touched 1.3340 where there is decent selling, but stops above 1.3350 are coming into focus. The 1.3350 level is the 61.8 fibo of the 1.3411/1.3255 move and a break of that level targets a full retracement towards 1.3410. the EUR/USD trades 1.3335/40.
EUR/USD: German IFO To Be Next Event For Euro
EUR/USD moves of late have been dictated by Fed expectations, US data and EUR/JPY flows. The attention will shift to the EZ later today with the release of the German IFO at 08:00 GMT. Recent data out of Europe has been positive and comments from ECB and EZ financial minister officials have been upbeat.
If the German IFO supports that view the EUR should continue to track higher against the USD and EUR. The median expectation is for 106.5 slightly down from the 107.0 reading in February. A weaker number could see the EUR/JPY ease, but traders feel that a dip in the cross should be viewed as a buying opportunity with heavy EUR/JPY buying flows expected tomorrow and Friday out of Tokyo.
The 61.8 fibo of the 1.3411/1.3255 move comes in at 1.3350 and there are stops above that level. A break above 1.3250 targets a full retracement to 1.3410. There is hourly support built up at 1.3320 and a break below that level could see a drift towards 1.3290. The EUR/USD trades 1.3326/31.
If the German IFO supports that view the EUR should continue to track higher against the USD and EUR. The median expectation is for 106.5 slightly down from the 107.0 reading in February. A weaker number could see the EUR/JPY ease, but traders feel that a dip in the cross should be viewed as a buying opportunity with heavy EUR/JPY buying flows expected tomorrow and Friday out of Tokyo.
The 61.8 fibo of the 1.3411/1.3255 move comes in at 1.3350 and there are stops above that level. A break above 1.3250 targets a full retracement to 1.3410. There is hourly support built up at 1.3320 and a break below that level could see a drift towards 1.3290. The EUR/USD trades 1.3326/31.
USD/JPY, EUR/JPY: Treading Water, EUR Bias Still Up, USD Offers
Both USD/JPY and EUR/JPY look to be treading water now after some action earlier. EUR/JPY looks to have been the focus with stops above recent highs tripped earlier. The cross moved up to the 157.75/80 level, pulling USD/JPY up to 118.35/40. EUR/JPY later traded off on profit-takes and long liquidation, taking USD/JPY down with it.
The cross continues to see support around the 157.35 session low, just below the top of the Ichimoku cloud at 157.37. More support is eyed at 156.90-157.00, 156.93 the low in New York overnight. Topside resistance is eyed ahead of 158.00 but there is really no major technical level till the 159.63 record high seen on February 23. The bias here remains up with a large investment trust launch due tomorrow.
USD/JPY looks well bid but offers ahead of 118.50 option barriers from a large Asian name continue to cap it. Support below is seen firm from 117.50, a Japanese importer level and possibly a base for further tests up going forward. The overnight low was 117.64. USD/JPY currently trades 118.17/21, EUR/JPY 157.48/53.
The cross continues to see support around the 157.35 session low, just below the top of the Ichimoku cloud at 157.37. More support is eyed at 156.90-157.00, 156.93 the low in New York overnight. Topside resistance is eyed ahead of 158.00 but there is really no major technical level till the 159.63 record high seen on February 23. The bias here remains up with a large investment trust launch due tomorrow.
USD/JPY looks well bid but offers ahead of 118.50 option barriers from a large Asian name continue to cap it. Support below is seen firm from 117.50, a Japanese importer level and possibly a base for further tests up going forward. The overnight low was 117.64. USD/JPY currently trades 118.17/21, EUR/JPY 157.48/53.
Swiss Outlook (27th March 2007)
Spot USD/CHF opened NY around 1.2220 then got belted on weak US new home sales data which knocked the pair down to 1.2217 at the low. Techies were eyeing this level as support, as it represented the lows from Friday, and also coincided with a support line on the hourly charts, and the two together repelled the onslaught.
Profit-taking from momentum and leveraged accounts bounced the pair back to 1.2160, and the pair traded in an apprehensive 40-60 range for the remainder of the session, and closed at 1.2155. Markets are becoming increasingly more sensitive to the escalation in tensions with Iran over the British navy personnel who are being held hostage, as well as increased rhetoric over the nuclear program, following the UN's tougher stance on sanctions, which is why USD/CHF led the pack down.
EUR/CHF was like the dog being wagged by the tail today, as for once USD/CHF flow overwhelmed EUR/CHF flow. The sharp drop in USD/CHF knocked the pair down to 1.6173 at the low, however a steady demand ground the pair higher to close just above 1.6200, despite heavy overnight sell orders at that level.
Profit-taking from momentum and leveraged accounts bounced the pair back to 1.2160, and the pair traded in an apprehensive 40-60 range for the remainder of the session, and closed at 1.2155. Markets are becoming increasingly more sensitive to the escalation in tensions with Iran over the British navy personnel who are being held hostage, as well as increased rhetoric over the nuclear program, following the UN's tougher stance on sanctions, which is why USD/CHF led the pack down.
EUR/CHF was like the dog being wagged by the tail today, as for once USD/CHF flow overwhelmed EUR/CHF flow. The sharp drop in USD/CHF knocked the pair down to 1.6173 at the low, however a steady demand ground the pair higher to close just above 1.6200, despite heavy overnight sell orders at that level.
Sterling Outlook (27th March 2007)
The GBP/USD opened in Asia around 1.9690 in Asia after moving higher on broad USD weakness in the wake of much weaker than expected US new home sales and heavy demand for JPY-funded carry trades by US funds. The GBP/USD moved up to 1.9705 in early Tokyo on the back of GBP/JPY demand, but good selling interest by UK clearers capped and sent it lower.
The GBP/USD eased to 1.9672 before settling between 1.9680/90 for the balance of the quiet session. The GBP/JPY broke above yesterday's 232.70 high to 233.00 at one stage before Japanese profit taking pushed the cross back to 232.70. The EUR/GBP was a non-event in Asia and stayed trapped in a 0.6765/73 range. The GBP/USD is getting support form divergent shifts in BOE and Fed expectations.
The recent run of strong UK data has revived expectations for another BOE rate hike in the next few months while the weak US new home sales data yesterday put the chance of a Fed cut at some stage back on the table. There is stiff resistance in the GBP/USD between 1.9720/50 as it has topped out in that window nine times since Jan 25. Hourly support is found at 1.9660.
The GBP/USD eased to 1.9672 before settling between 1.9680/90 for the balance of the quiet session. The GBP/JPY broke above yesterday's 232.70 high to 233.00 at one stage before Japanese profit taking pushed the cross back to 232.70. The EUR/GBP was a non-event in Asia and stayed trapped in a 0.6765/73 range. The GBP/USD is getting support form divergent shifts in BOE and Fed expectations.
The recent run of strong UK data has revived expectations for another BOE rate hike in the next few months while the weak US new home sales data yesterday put the chance of a Fed cut at some stage back on the table. There is stiff resistance in the GBP/USD between 1.9720/50 as it has topped out in that window nine times since Jan 25. Hourly support is found at 1.9660.
Yen Outlook (27th March 2007)
EUR/JPY led JPY-based pairs higher early in Asia with the cross trading up from the 157.35 level through stops above 157.70. A double top was seen in the 157.60-65 level last Thursday-Friday. Profit-takes and long liquidation pushed EUR/JPY lower later but support continued to be seen on dips towards the early low on the back of expectations of good demand tomorrow for Nomura's large EUR-denominated investment trust launch.
Some dealers eye the launch to be in excess of the reported Y210 bln, with some estimates as high as Y420 bln. With the break above last week's high, EUR/JPY see little in the way of major resistance till the 159.63 record high set on February 23. USD/JPY rose to 118.35/40 on the back of the initial EUR/JPY surge higher, trading back later towards the early low around 118.05.
NZD/JPY saw some light sales out of Tokyo, seen to be profit-takes on longs taken by the same Japanese securities house yesterday. It remained relatively bid however, just under 85.00. AUD/JPY also remained bid though offers are eyed from the same player ahead of 96.00. Bids are solid towards 95.00. GBP/JPY also remained bid.
Some dealers eye the launch to be in excess of the reported Y210 bln, with some estimates as high as Y420 bln. With the break above last week's high, EUR/JPY see little in the way of major resistance till the 159.63 record high set on February 23. USD/JPY rose to 118.35/40 on the back of the initial EUR/JPY surge higher, trading back later towards the early low around 118.05.
NZD/JPY saw some light sales out of Tokyo, seen to be profit-takes on longs taken by the same Japanese securities house yesterday. It remained relatively bid however, just under 85.00. AUD/JPY also remained bid though offers are eyed from the same player ahead of 96.00. Bids are solid towards 95.00. GBP/JPY also remained bid.
Euro Outlook (27th March 2007)
The EUR/USD opened in Asia around 1.3330 after popping higher in the wake of weaker than expected US new home sales data. The EUR/USD traded up to 1.3336 when early Tokyo bought EUR/JPY up from 157.37 to 157.79 and then eased back to 1.3323 when the cross buying subsided.
The EUR/USD then settled in a 1.3325/35 range for the balance of the session while the USD/JPY and EUR/JPY was the main focus of the Asian market today. The rapidly shifting Fed expectations and EUR/JPY flows have been the main drivers of EUR/USD moves lately, but German IFO later today might see the spotlight temporarily shift to the EZ economy. European data has been solid of late while EZ and ECB officials have been generally upbeat about the EZ economy.
The German IFO should confirm that view or risk the EUR/USD shifting below hourly support around 1.3320. Key resistance is found at 1.3350, which is the 61.8 fibo of the 1.3411/1.3255 move. Stops are eyed above 1.3350 and a break above that level targets last week's high around 1.3410. Talk of a 1.3250/1.3450 DNT option should limit extended moves ahead of Bernanke on Wednesday.
The EUR/USD then settled in a 1.3325/35 range for the balance of the session while the USD/JPY and EUR/JPY was the main focus of the Asian market today. The rapidly shifting Fed expectations and EUR/JPY flows have been the main drivers of EUR/USD moves lately, but German IFO later today might see the spotlight temporarily shift to the EZ economy. European data has been solid of late while EZ and ECB officials have been generally upbeat about the EZ economy.
The German IFO should confirm that view or risk the EUR/USD shifting below hourly support around 1.3320. Key resistance is found at 1.3350, which is the 61.8 fibo of the 1.3411/1.3255 move. Stops are eyed above 1.3350 and a break above that level targets last week's high around 1.3410. Talk of a 1.3250/1.3450 DNT option should limit extended moves ahead of Bernanke on Wednesday.
Monday, March 26, 2007
US TECHS: Commodities Outlook; Gold and Oil
Apr [gold] has erased Friday's losses, the occurrence of which did not disturb the longer-term bullish picture derived from uptrend lines dating back to early October of last year. Retracement targets at $670 remain an objective, though weekly chart resistance comes in just before that at $666-68.
Bullish trend models on weeklies and monthlies keep the market on an upward focus. Weekly swing point support is at $652.50 for a second consecutive week, and a level bulls need to see held by week's end. Intraday supports are at $660-62 Apr.
In [oil], today's advance has moved back up towards recent highs, just missing weekly resistance to either side of $63.55 May and under Mar peaks at $63.75. Trend Intensity will finally trigger bullishly today if modest gains are maintained into the close.
That does not guarantee a range breakout, and keep in mind that only aily trend models will be bullish at the close, with weeklies neutral and monthlies technically bearish until Friday. Daily momentum readings are slightly positive, but RSI does show a bullish downtrend break. With the higher low on daily charts, next big targets are at $65 May.
Bullish trend models on weeklies and monthlies keep the market on an upward focus. Weekly swing point support is at $652.50 for a second consecutive week, and a level bulls need to see held by week's end. Intraday supports are at $660-62 Apr.
In [oil], today's advance has moved back up towards recent highs, just missing weekly resistance to either side of $63.55 May and under Mar peaks at $63.75. Trend Intensity will finally trigger bullishly today if modest gains are maintained into the close.
That does not guarantee a range breakout, and keep in mind that only aily trend models will be bullish at the close, with weeklies neutral and monthlies technically bearish until Friday. Daily momentum readings are slightly positive, but RSI does show a bullish downtrend break. With the higher low on daily charts, next big targets are at $65 May.
EUR/USD: Friday Highs Eyed after Home Sales
EUR/USD is eyeing highs in the low 1.3343s, the level where EUR/USD stalled after the news of Iran's taking of 15 hostages hit the wires. With central banks buying EUR/USD on the approach of 1.3250 this morning, some suggest they may use the present rally to book some profits.
Dealers also not the fluky nature of the new home sales data which is best a guess by the census bureau and the existing home sales data which is made up of closed sales and reported by the NAR, an industry group. One thing real estate agents can do is count. The census department? Not so much. EUR/USD trades at 1.3340 with stops seen in the 1.3345/50 area. Support is at 1.3295 on dips.
Dealers also not the fluky nature of the new home sales data which is best a guess by the census bureau and the existing home sales data which is made up of closed sales and reported by the NAR, an industry group. One thing real estate agents can do is count. The census department? Not so much. EUR/USD trades at 1.3340 with stops seen in the 1.3345/50 area. Support is at 1.3295 on dips.
USD/JPY: Runs Into Japanese Support After Dollar Slide
USD/JPY runs into Japanese support at the 117.75/80 area after the dollar slide following the weakness in US new home sales. USD/JPY fell from 118.30 just before the release, filling in bids between 118.20 and 118.00. Light intra-day stops were also filled, yet the dollar has struggled to overcome the decent Japanese bids.
More interest is tipped towards the mid 117's and should negate some of the bullish sentiment. The fall in new home sales increases the risk of a housing market led recession. This could spillover to the equity market and increase pressure on carry trades.
More interest is tipped towards the mid 117's and should negate some of the bullish sentiment. The fall in new home sales increases the risk of a housing market led recession. This could spillover to the equity market and increase pressure on carry trades.
GBP/USD: Extends North after US New Home Sales Slump
Cable has risen to a four-day high of 1.9705 the back of the slump in February US new home sales to a seven-year low. This is good news for US interest rate doves. The USD was already on the back foot into the release. 1.9725/30 is an above-market resistance window.
Sterling scaled an six-week peak just shy of 1.9730 last Thursday. 1.9690 is now a pullback support point. Lower props include 1.9674 (Friday's NY session top) and 1.9640. BoE Deputy Governor John Gieve is slated to speak at 16:00GMT. Gieve is also one of the five MPC members due to address the UK TSC from 08:45GMT tomorrow. BoE Governor Mervyn King headlines.
Sterling scaled an six-week peak just shy of 1.9730 last Thursday. 1.9690 is now a pullback support point. Lower props include 1.9674 (Friday's NY session top) and 1.9640. BoE Deputy Governor John Gieve is slated to speak at 16:00GMT. Gieve is also one of the five MPC members due to address the UK TSC from 08:45GMT tomorrow. BoE Governor Mervyn King headlines.
USD/CHF: Retreats To Fresh Intraday Low On Poor US Data
Spot has moved back into the 1.21's in the wake of the latest poor US housing numbers. Bids in USD/CHF into the 1.2200 area were attempting to prop the downside but macro account sales have forced USD/CHF lower and rates have just printed fresh session and intraday lows at 1.2161. Any clear break below 1.2160 will put a negative bias on the pair intraday and see the Franc look to probe back for a retest of the 1.2114 bounce low from Friday.
Swiss Outlook (26th March 2007)
Ahead of the North American open and USD/CHF is consolidating the drift into the 1.22's. Offers ahead of 1.2220 have been retested but have once more stood firm despite spot continuing to look supported. Dealers also cite buying in EUR/CHF as having an impact on the Dollar pair but sales into the 1.62's in the cross are attempting to thwart further strength both here and in USD/CHF.
Looking ahead, domestic dealers note the event-risk on the horizon for the Swissie and this could weigh on the CHF. However, we at IFR expect the latest UBS Consumption Indicator, for February, to show a fairly healthy growth while the Swiss KOF Leading Indicator is expected to rise slightly.
As a result the Franc could look to eke gains into the end of the week as solid consumption growth and continued investment underpin the robust nature of Swiss fundamentals. Thus speculative accounts may look to sell topside failures for smaller gains, with only a break below 1.2160 support opening the downside in the short-term.
Looking ahead, domestic dealers note the event-risk on the horizon for the Swissie and this could weigh on the CHF. However, we at IFR expect the latest UBS Consumption Indicator, for February, to show a fairly healthy growth while the Swiss KOF Leading Indicator is expected to rise slightly.
As a result the Franc could look to eke gains into the end of the week as solid consumption growth and continued investment underpin the robust nature of Swiss fundamentals. Thus speculative accounts may look to sell topside failures for smaller gains, with only a break below 1.2160 support opening the downside in the short-term.
Sterling Outlook (26th March 2007)
Cable pushed its recovery envelope from today's early Asian session five-day low of 1.9572 to a peak of 1.9641 in early European trade, as the continent absorbed Hometrack's 23:01GMT disclosure that UK house prices have risen 6.7% on an annualized basis. That number is the highest since June 2003, and is good news for UK rate hawks forecasting another 25bp base rate hike to 5.5% in Q2.
The next MPC meeting takes place next week (Apr 4/5). Sterling offers are touted at 1.9650 and 1.9660. Resistance levels above include 1.9675, 1.9690, and 1.9725/30. On the downside: bids are tipped at 1.9570 and 1.9550. The latter level approximates to the 55-day moving average. Today's key US event risk is the 14:00GMT unveiling of February new home sales.
Forecast: 993,000, up 4.9%. This week's key US event risk is Fed Governor Ben Bernanke's midweek testimony to the Joint Economic Committee of Congress. BoE Governor Mervyn King will be one of five MPC members who will testify before the Treasury Select Committee from 08:45GMT tomorrow, re: February's BoE inflation report. The others include Rachel Lomax.
The next MPC meeting takes place next week (Apr 4/5). Sterling offers are touted at 1.9650 and 1.9660. Resistance levels above include 1.9675, 1.9690, and 1.9725/30. On the downside: bids are tipped at 1.9570 and 1.9550. The latter level approximates to the 55-day moving average. Today's key US event risk is the 14:00GMT unveiling of February new home sales.
Forecast: 993,000, up 4.9%. This week's key US event risk is Fed Governor Ben Bernanke's midweek testimony to the Joint Economic Committee of Congress. BoE Governor Mervyn King will be one of five MPC members who will testify before the Treasury Select Committee from 08:45GMT tomorrow, re: February's BoE inflation report. The others include Rachel Lomax.
Yen Outlook (26th March 2007)
USD retained the bid tone seen in the Asian session, helping USD/JPY up to the 118.33. Supporting the USD/JPY move up was talk of sizeable bids below, especially from around the 117.80 to 117.50 level from longer-term players including importers and both retail and institutional investors eyeing fresh asset allocations for the fiscal year beginning next month.
Interest for the JPY crosses was also healthy, with flows relating to Uridashi flows and the fresh investment trust launches. Helping to cap USD/JPY on the topside was aggressive sales from option players, some looking to defend barriers from as close as 118.40 and large exotics up at 118.50. Stops are reported to be building above the latter level however.
A break above would also take USD/JPY above key technical levels including the Ichimoku kijun line at 118.41 and the cloud base at 118.47. The 10-day moving average is just above at 118.68. Focus for the European afternoon is on the Chicago activity index and new home sales data. The latter will be interesting given the concern of a housing market collapse and the impact on the broader economy.
Interest for the JPY crosses was also healthy, with flows relating to Uridashi flows and the fresh investment trust launches. Helping to cap USD/JPY on the topside was aggressive sales from option players, some looking to defend barriers from as close as 118.40 and large exotics up at 118.50. Stops are reported to be building above the latter level however.
A break above would also take USD/JPY above key technical levels including the Ichimoku kijun line at 118.41 and the cloud base at 118.47. The 10-day moving average is just above at 118.68. Focus for the European afternoon is on the Chicago activity index and new home sales data. The latter will be interesting given the concern of a housing market collapse and the impact on the broader economy.
Euro Outlook (26th March 2007)
EUR/USD started the week with an offered tone and spot removed stops amid the steady Asian EUR/JPY sales on the break below 1.3275. However, buying ahead of the 1.3250 level stalled further weakness as reserve managers favored the single currency into European action. On the topside offers into 1.3280 cap initial rebounds with only a break above 1.3300 taking the pressure off the downside intraday.
On the options front, the bottom leg of the 1.3250/3450 DNT's remain targeted while expiries this week see a host of various 1.32 & 1.33 strikes. Looking ahead, US New Home Sales Numbers are the early risk (985K the consensus) to the Dollar correction, due at 14:00 GMT, with any clear break below 1.3250 support finding EUR/USD stops sub-1.3245 before more official buyers emerge into 1.3230 with technical downside triggers into 1.3225.
Elsewhere, the ECB's Bini Smaghi has noted in his recent speech in Paris that "concerns over FX rates have been overdone" while more ECB speakers are noted later along with the EZ FinMin meeting.
On the options front, the bottom leg of the 1.3250/3450 DNT's remain targeted while expiries this week see a host of various 1.32 & 1.33 strikes. Looking ahead, US New Home Sales Numbers are the early risk (985K the consensus) to the Dollar correction, due at 14:00 GMT, with any clear break below 1.3250 support finding EUR/USD stops sub-1.3245 before more official buyers emerge into 1.3230 with technical downside triggers into 1.3225.
Elsewhere, the ECB's Bini Smaghi has noted in his recent speech in Paris that "concerns over FX rates have been overdone" while more ECB speakers are noted later along with the EZ FinMin meeting.
Friday, March 23, 2007
EUR/USD: Selling Accelerates, Bunds Hammered
EUR/USD has accelerated its losses, falling into the high 1.3280s. German bunds are being hammered simultaneously, so dealers suspect the selling may be fixed income related. Spreads between US 10-yr notes and comparable bunds are nearly 4-basis points tighter today, a factor that is usually EUR supportive, but not until the dust settles. Bids are layered down through 1.3275 while stops re-emerge under 1.3270.
GBP/USD: Stops Below 1.9600 Tripped, Bids Tipped at 1.9580
Tripped stops below 1.9600 have helped depress cable to a new two-day low of 1.9587, as the USD racks up across-the-board pre-weekend gains in the wake of the top-of-the-hour disclosure of February's unexpected rise in US existing home sales. GBP/USD demand is noted at 1.9580, with further bids tipped at 1.9550/55. 1.9600 is now a rebound resistance level. Above-figure obstacles include 1.9611 (yesterday's low), 1.9627 (today's Asian session base), 1.9651 (today's Asian session peak), 1.9675, 1.9690 and 1.9725.
USD/JPY: Pushes Higher In Quiet European Trade
USD/JPY pushes higher in quiet European trade, with some US names covering shorts after the downside held in the earlier move lower. The market is lacking inspiration and is struggling to overcome offers ahead of the 118.00 area currently. A US investment house that sold on the way down is buying around these levels. Further offers are seen into the 118.25/30 area should this rally gain momentum.
USD/CHF: Housing Related Rally Sparks Quasi-Official Re-Test
The robust US housing numbers have sparked a US unit rally and spot has return to re-test the low 1.2180's, where coincidentally the pair stalled yesterday on selling from a quasi official fund. More sellers are seen into the 1.2190's back to 1.2200 should the move higher continue while stops are seen above 1.2205.
US TECHS: Commodities Outlook; Gold and Oil
Apr [gold] tapped against major resistance on daily and weekly charts yesterday and just missed reaching 62% retracements at $670. With range only a shade over $15 this week, projected support and resistance levels into next week are also narrow, currently showing $649-668 as the band that should initially hold prices.
Chart alignment remains constructive on weeklies and monthlies, though a quick recovery is needed to $661.50 or better to keep daily bull trends in place into next week. Larger upside targets are near $680. Intraday resistance is currently at $662-64 and falling.
In [oil], follow-through strength is just below weekly resistance at $62.80-90, the market already set to shift to neutral from bearish on that time frame. The market may finally exit its long-bearish monthly trend if firm prices are sustained through month's end. Interestingly, Trend Intensity has not yet been triggered bullishly, even with today's gains.
The market is above 200-day moving averages on continuous charts at $61.47, but still well below that measure on the May contract at $64.37. Range highs set earlier this month at $63.75 are a very important barrier to get past, and given recent patterns, a test is expected.
Chart alignment remains constructive on weeklies and monthlies, though a quick recovery is needed to $661.50 or better to keep daily bull trends in place into next week. Larger upside targets are near $680. Intraday resistance is currently at $662-64 and falling.
In [oil], follow-through strength is just below weekly resistance at $62.80-90, the market already set to shift to neutral from bearish on that time frame. The market may finally exit its long-bearish monthly trend if firm prices are sustained through month's end. Interestingly, Trend Intensity has not yet been triggered bullishly, even with today's gains.
The market is above 200-day moving averages on continuous charts at $61.47, but still well below that measure on the May contract at $64.37. Range highs set earlier this month at $63.75 are a very important barrier to get past, and given recent patterns, a test is expected.
Swiss Outlook (23rd March 2007)
In the wake of the central bank warning on the potential for a Franc correction, that emerged un NY yesterday, the CHF has traded a tight bias.
SNB Board member-designate Thomas Jordan noted in a local speech that he felt the Franc could undergo an abrupt revaluation at some point in the future should "the exchange rate developments not correspond to fundamental data" while on the subject of Swiss rates he is quoted as saying "the Swiss National Bank's series of interest rate increases is not over" but the "need to act to cut off inflationary pressures is decreasing".
The comments highlight little we did already know in that the SNB is worried over the weakness of the Swissie and that we are in the middle of a gradual tightening/normalization cycle. Thus far cross sales have impacted USD/CHF intraday but 1.2135/65 has traded on the wide, more offers are noted into 1.2180.
Into North American trading and the Fed's Lacker, Plosser & Geithner are on the roster ahead of the weekend. On the data front, US February Home Sales numbers are due for release at 14:00 GMT with 6.3Mn forecast.
SNB Board member-designate Thomas Jordan noted in a local speech that he felt the Franc could undergo an abrupt revaluation at some point in the future should "the exchange rate developments not correspond to fundamental data" while on the subject of Swiss rates he is quoted as saying "the Swiss National Bank's series of interest rate increases is not over" but the "need to act to cut off inflationary pressures is decreasing".
The comments highlight little we did already know in that the SNB is worried over the weakness of the Swissie and that we are in the middle of a gradual tightening/normalization cycle. Thus far cross sales have impacted USD/CHF intraday but 1.2135/65 has traded on the wide, more offers are noted into 1.2180.
Into North American trading and the Fed's Lacker, Plosser & Geithner are on the roster ahead of the weekend. On the data front, US February Home Sales numbers are due for release at 14:00 GMT with 6.3Mn forecast.
Sterling Outlook (23rd March 2007)
1.9690 offers kept a lid on cable following its early Europe break through the peak of today's 1.9627-1.9651 Asian session range. The rate's subsequent slide to two-day lows just shy of 1.9600 bids was blamed on Eastern European sales of GBP/JPY. Some GBP/USD sell-stops are tipped below 1.9600. Further demand is noted at 1.9580 and 1.9550/55.
Gain consolidation from 1.9218 (March 14 low) is the big-picture sterling story, with the risk of another 25bp UK base rate hike to 5.5% as early as next month (Apr 5) helping underpin. Wednesday's more dovish-than-expected FOMC statement is also a GBP/USD prop. Further sell interest is noted up at 1.9725/30, 1.9740 and 1.9750. Buy stops are pegged above 1.9750.
EUR/GBP plumbed a nine-day low of 0.6768 during the European morning, on the back of dovish comments from outgoing ECB member Gaspari (Bloomberg). Today's key US event risk is the 14:00GMT disclosure of February new home sales. Forecast: 6.30 million, down 2.5%. The Fed's Lacker, Plosser and Geithner are all slated to speak today.
Gain consolidation from 1.9218 (March 14 low) is the big-picture sterling story, with the risk of another 25bp UK base rate hike to 5.5% as early as next month (Apr 5) helping underpin. Wednesday's more dovish-than-expected FOMC statement is also a GBP/USD prop. Further sell interest is noted up at 1.9725/30, 1.9740 and 1.9750. Buy stops are pegged above 1.9750.
EUR/GBP plumbed a nine-day low of 0.6768 during the European morning, on the back of dovish comments from outgoing ECB member Gaspari (Bloomberg). Today's key US event risk is the 14:00GMT disclosure of February new home sales. Forecast: 6.30 million, down 2.5%. The Fed's Lacker, Plosser and Geithner are all slated to speak today.
Yen Outlook (23rd March 2007)
JPY is mid-range after good buying interest in early European trade. USD/JPY fell amid selling via the JPY crosses. The pair gave up the 118.00 handle amid GBP/JPY and EUR/JPY sales after exporter offers and option names capped gains. This encouraged speculative accounts and some recent longs to book profits after failure to sustain 118.00.
Directional bias was mixed, with carry trade interest not as prominent as earlier on in the year, while stabilisation in global equities reduced the overall demand for JPY. Flight to yield and interest relating to investment trust launches should offset some of the anticipated Japanese fiscal year-end flows and leave a small topside bias despite today's small correction. EUR/JPY sees similar price action, recovering from 156.40 to trade back into 156.75.
The topside should be capped by today's Bund coupon and redemption payments, yet custodial name and trust bank interest should alleviate any sustained downward pressure. Talk of very large uridashi issuance next week is restricting JPY rallies and with investor risk appetite at increased levels JPY-funded positions should continue.
Directional bias was mixed, with carry trade interest not as prominent as earlier on in the year, while stabilisation in global equities reduced the overall demand for JPY. Flight to yield and interest relating to investment trust launches should offset some of the anticipated Japanese fiscal year-end flows and leave a small topside bias despite today's small correction. EUR/JPY sees similar price action, recovering from 156.40 to trade back into 156.75.
The topside should be capped by today's Bund coupon and redemption payments, yet custodial name and trust bank interest should alleviate any sustained downward pressure. Talk of very large uridashi issuance next week is restricting JPY rallies and with investor risk appetite at increased levels JPY-funded positions should continue.
Euro Outlook (23rd March 2007)
Into North American trading and more ECB and Fed speakers are on the roster ahead of the weekend with Stark, Wellink, Liikanen & Papademos fighting in the ECB"s corner while Lacker, Plosser & Geithner will follow the FOMC statement with their take on how economic outlook could unfold. On the data front, there is no top-tier economic indicators set for unveiling.
US February Home Sales numbers are due for release at 14:00 GMT (6.31Mln expected). On the options front, 1.3300 expiries at the NY cut at 14:00 GMT generated gamma related demand amid the initial European test of the downside. EUR/USD opened the week at 1.3317 and should the price stick close to current levels then there will be the potential for a close on the week near the above level.
Technically, this would create a Doji on the weekly candlestick charts and signal that further gains could be limited, with lower lows (below the this week low at 1.3273) expected to confirm a chance in direction. Any such reversal of the medium-term bull-trend would need to see 1.3250 support cleared before the downside would look sustainable and not a short-term correction.
US February Home Sales numbers are due for release at 14:00 GMT (6.31Mln expected). On the options front, 1.3300 expiries at the NY cut at 14:00 GMT generated gamma related demand amid the initial European test of the downside. EUR/USD opened the week at 1.3317 and should the price stick close to current levels then there will be the potential for a close on the week near the above level.
Technically, this would create a Doji on the weekly candlestick charts and signal that further gains could be limited, with lower lows (below the this week low at 1.3273) expected to confirm a chance in direction. Any such reversal of the medium-term bull-trend would need to see 1.3250 support cleared before the downside would look sustainable and not a short-term correction.
Thursday, March 22, 2007
USD/JPY: Offers Remain at 118.00 But Stops Building Above
Traders are hearing reports of real money selling on USD/JPY and EUR/JPY today but offsetting that has been aggressive AUD/JPY, NZD/JPY and CAD/JPY buying. Japanese banks report that USD/JPY remains very bid, though offers are at 118.00 with exporter interest staggered up to 118.50.
Also noted by Japanese accounts are reports that exporters are getting very nervous with the latest bout of USD/JPY and JPY cross strength and are now starting to look to lift cover, for fear that another bout of JPY weakness will emerge. Only Tuesday, long-yields on JGBs dropped to the lowest in a year following the BOJ statement, further underpinning the carry trade bias.
In addition, last night the Japanese government and MOF released the latest big company mood index which declined during the Jan-Mar period with companies looking for a decline in Capex. Stops are growing above 118.00 with stops at 118.20 & 118.30 reported on USD/JPY. USD/JPY currently trades at 117.73/75.
Also noted by Japanese accounts are reports that exporters are getting very nervous with the latest bout of USD/JPY and JPY cross strength and are now starting to look to lift cover, for fear that another bout of JPY weakness will emerge. Only Tuesday, long-yields on JGBs dropped to the lowest in a year following the BOJ statement, further underpinning the carry trade bias.
In addition, last night the Japanese government and MOF released the latest big company mood index which declined during the Jan-Mar period with companies looking for a decline in Capex. Stops are growing above 118.00 with stops at 118.20 & 118.30 reported on USD/JPY. USD/JPY currently trades at 117.73/75.
USD/JPY: Bids In 117.60's Support, EUR/JPY Real Money Interest
Bids in the 117.60's in USD/JPY are keeping spot supported for the moment. Japanese banks all say are seeing USD/JPY well bid but trading continues to look anything but as spot struggles to overcome the supply trailing back to 117.80.
Above offers from exporters and various repatriation interest is seen into 118.00, back to 118.50 while stops are noted at 118.20 with more above 118.30. Against the Euro the Yen is also noting real money demand from real money accounts with EUR/JPY offers once more attempting to depress trading back to the 157.00 area.
Bids in the teens have offset any further weakness this far but with a medium-term cap in place at 157.50 and EUR/USD looking offered the downside in EUR/JPY should remain in focus into the European closes.
Above offers from exporters and various repatriation interest is seen into 118.00, back to 118.50 while stops are noted at 118.20 with more above 118.30. Against the Euro the Yen is also noting real money demand from real money accounts with EUR/JPY offers once more attempting to depress trading back to the 157.00 area.
Bids in the teens have offset any further weakness this far but with a medium-term cap in place at 157.50 and EUR/USD looking offered the downside in EUR/JPY should remain in focus into the European closes.
GBP/USD: Consolidating Gains, Support at 1.9665 & 1.9650
Cable is currently trading half-a-cent below its European morning six-week peak circa 1.9725, against a big-picture backdrop of gain consolidation from 1.9218 (March 14 low). The risk of Q2 UK and US interest rate divergence is helping underpin the pair.
The probability of another 25bp UK rate hike to 5.5% next quarter perhaps as early as next month (Apr 5), has risen on the back of today's very strong February UK retail sales data and an unexpected rise in March's CBI manufacturing orders balance. These GBP-positive figures follow Tuesday's UK CPI upside surprise although MPC member Barker says the committee does not want to "overreact" to that inflation shock (Northern Echo website).
By contrast, the risk of a 25bp Fed funds rate cut to 5.0% in June has increased following yesterday's more dovish than expected FOMC statement. Sterling support points include 1.9665 (today's Asian session base), 1.9650, 1.9620, and 1.9600.
The probability of another 25bp UK rate hike to 5.5% next quarter perhaps as early as next month (Apr 5), has risen on the back of today's very strong February UK retail sales data and an unexpected rise in March's CBI manufacturing orders balance. These GBP-positive figures follow Tuesday's UK CPI upside surprise although MPC member Barker says the committee does not want to "overreact" to that inflation shock (Northern Echo website).
By contrast, the risk of a 25bp Fed funds rate cut to 5.0% in June has increased following yesterday's more dovish than expected FOMC statement. Sterling support points include 1.9665 (today's Asian session base), 1.9650, 1.9620, and 1.9600.
EUR/USD: Slipping Despite Reports of Central Bank Bids
EUR/USD is somewhat on the defensive at the moment, trading in the high 1.3350s after an earlier rally stalled in the low 1.3370s. The market is universally bullish EUR/USD today in the wake of the neutral shift by the Fed on prospects for narrower interest rate differentials.
Central banks were rumored buying EUR/USD on dips to 1.3350 earlier in the day as well as selling USD/CHF on rallies toward 1.2140. Looks like the market may be having a case of indigestion, keeping it from rallying to aggressively today. Offers are seen in fair size beginning at 1.3380, dealers report.
From a macro perspective, EUR longs fear that central banks which loaded up the boat below the 1.3100 level earlier this month may turn seller if prices approach the 1.3450/1.3500 area in the days ahead. EUR/USD trades at 1.3356.
Central banks were rumored buying EUR/USD on dips to 1.3350 earlier in the day as well as selling USD/CHF on rallies toward 1.2140. Looks like the market may be having a case of indigestion, keeping it from rallying to aggressively today. Offers are seen in fair size beginning at 1.3380, dealers report.
From a macro perspective, EUR longs fear that central banks which loaded up the boat below the 1.3100 level earlier this month may turn seller if prices approach the 1.3450/1.3500 area in the days ahead. EUR/USD trades at 1.3356.
US TECHS: S&P May Have Formed a "W" Bottom
Longer-term charts show that the recent decline in the S&P cash index did not break below the 38% retracement support before attempting to bottom. Add to that the possibility of a "W" bottom pattern on daily charts and the contract has a good chance of trading higher over the next couple weeks, especially as the seasonal pattern is still holding a bullish bias through the middle of May.
The contract has covered a good deal of ground over the past three sessions so an immediate continuation is probably too much to ask, but pullbacks should be fairly limited and given the moderate sentiment measures there may be a good deal of dip buyers about.
The contract has covered a good deal of ground over the past three sessions so an immediate continuation is probably too much to ask, but pullbacks should be fairly limited and given the moderate sentiment measures there may be a good deal of dip buyers about.
Swiss Outlook (22nd March 2007)
US investment grade supply into the 1.21 area was absorbed amid slight European morning Dollar correction. As a result into North American trading and USD/CHF finds itself making stabs towards the 50% Fibo of the sell-off from 1.2167 to 1.2077 at 1.2122. Offers are seen into 1.2120/25 but technical accounts look to the 61.8% Fibo of the above move at 1.2133 as a more significant trigger.
Looking ahead, Bernanke comments are set to kick-off the North American session (13:20 GMT) followed by the 14:00 GMT unveiling of US Leading Indicators. The attention will turn to the 16:30 brace of Lacker and Kroszner before FOMC Vice-Chairman Kohn speaks in Washington at 17:30 GMT.
Domestic dealers look to the speech from the SNB's Jordan on the direction of Swiss rates. However, with a further 25bps priced in for Q2 there is little light the central bank designated member may shed on the future path to normalization. On the options front, further 1.2140 strikes are set to mature at the NY cut at 14:00 GMT.
Looking ahead, Bernanke comments are set to kick-off the North American session (13:20 GMT) followed by the 14:00 GMT unveiling of US Leading Indicators. The attention will turn to the 16:30 brace of Lacker and Kroszner before FOMC Vice-Chairman Kohn speaks in Washington at 17:30 GMT.
Domestic dealers look to the speech from the SNB's Jordan on the direction of Swiss rates. However, with a further 25bps priced in for Q2 there is little light the central bank designated member may shed on the future path to normalization. On the options front, further 1.2140 strikes are set to mature at the NY cut at 14:00 GMT.
Sterling Outlook (22nd March 2007)
Cable rallied by half-a-cent to fresh six-week highs circa 1.9725 after the 09:30GMT disclosure of February's much better-than-expected UK retail sales. These came in +1.4% m/m, +4.9% y/y, against forecast increases of 0.6% m/m, 3.8% y/y. January UK retail sales were also upwardly revised.
February's very strong UK retail sales increase the risk of the BoE MPC hiking the UK base rate by another 25bp to 5.5% as early as next month (Apr 5). Further good news for UK rate hawks came with the 11:00GMT unveiling of March's CBI manufacturing orders book balance. This rose to a 12-year high of +8, from +4 in February. A decline to +2 was expected. Touted offers at 1.9740 and 1.9750 represent bull targets north of 1.9725.
Noted upper obstacles include 1.9760, 1.9800, 1.9850 and 1.9900. Support points include 1.9694 (yesterday's high), 1.9665, 1.9650, 1.9620, and 1.9600. US weekly jobless claims are due at 12:30GMT. Forecast: 323k. Bernanke is slated to speak about credit issues at 13:20GMT. US February leading indicators are due at 14:00GMT. Forecast: minus 0.4%.
February's very strong UK retail sales increase the risk of the BoE MPC hiking the UK base rate by another 25bp to 5.5% as early as next month (Apr 5). Further good news for UK rate hawks came with the 11:00GMT unveiling of March's CBI manufacturing orders book balance. This rose to a 12-year high of +8, from +4 in February. A decline to +2 was expected. Touted offers at 1.9740 and 1.9750 represent bull targets north of 1.9725.
Noted upper obstacles include 1.9760, 1.9800, 1.9850 and 1.9900. Support points include 1.9694 (yesterday's high), 1.9665, 1.9650, 1.9620, and 1.9600. US weekly jobless claims are due at 12:30GMT. Forecast: 323k. Bernanke is slated to speak about credit issues at 13:20GMT. US February leading indicators are due at 14:00GMT. Forecast: minus 0.4%.
Yen Outlook (22nd March 2007)
JPY trades on an easier footing amid fresh fund flows. In general, JPY underperformed the broader market despite the focus on dollar moves in the wake of the yesterday's FOMC statement. Leverage activity and hedge fund interest joined the importer bids. The pair made gradual upside progress and was buoyed by healthy interest via the JPY crosses.
AUD/JPY and GBP/JPY were helped by new Uridashi issues next week, while EUR/JPY saw good retail investor demand of its own. Next week coincides with the Japanese fiscal year end and the market will be buffeted by these flows. This appeared to clip gains, with EUR/JPY struggling into 157.50 and USD/JPY unable to clear 118.00. Focus is likely to turn back to yield, with equity market stabilisation increasing risk appetite and a limited near-term data schedule.
BOJ Governor Fukui's assurance of low interest rates in the near-term also injected fresh liquidity and increased the chances of a USD/JPY move up to 118.30-50. EUR/JPY has scope for further gains, although it is notable that some of the other JPY crosses are seeing larger flows as EUR/JPY struggles to recapture the momentum seen last month.
AUD/JPY and GBP/JPY were helped by new Uridashi issues next week, while EUR/JPY saw good retail investor demand of its own. Next week coincides with the Japanese fiscal year end and the market will be buffeted by these flows. This appeared to clip gains, with EUR/JPY struggling into 157.50 and USD/JPY unable to clear 118.00. Focus is likely to turn back to yield, with equity market stabilisation increasing risk appetite and a limited near-term data schedule.
BOJ Governor Fukui's assurance of low interest rates in the near-term also injected fresh liquidity and increased the chances of a USD/JPY move up to 118.30-50. EUR/JPY has scope for further gains, although it is notable that some of the other JPY crosses are seeing larger flows as EUR/JPY struggles to recapture the momentum seen last month.
Euro Outlook (22nd March 2007)
Asian trading saw the 1.3400 option barriers erased, with 1.3412 seen as the high. However, the spot failure to hold the break into the 1.34's left the downside open into European trading. Early US selling of EUR/JPY depressed spot before interbank and speculative supply emerged.
Yet buying into the low 1.3360's from US investment and French names staved off further weakness. Sales in EUR/GBP in the wake of the recent UK data then weighed before middle-eastern sellers were noted. Ahead of the Euro Zone data and spot finally managed to break below 1.3360 support but the dip was short-lived as the combination of gamma related demand, linked to the 1.3350 expiries, and fresh buyers, linked to the EZ numbers, emerged to force a rebound.
Offers are still seen into 1.3380 that look to cap rebounds while barriers are speculated upon into 1.3425 but confirmed into 1.3450 and 1.3500. Looking ahead, Bernanke comments are set to kick-off the North American session (13:20 GMT) followed by some more ECB Liikanen comments (due around 13:30 GMT) before the 14:00 GMT unveiling of US Leading Indicators.
Yet buying into the low 1.3360's from US investment and French names staved off further weakness. Sales in EUR/GBP in the wake of the recent UK data then weighed before middle-eastern sellers were noted. Ahead of the Euro Zone data and spot finally managed to break below 1.3360 support but the dip was short-lived as the combination of gamma related demand, linked to the 1.3350 expiries, and fresh buyers, linked to the EZ numbers, emerged to force a rebound.
Offers are still seen into 1.3380 that look to cap rebounds while barriers are speculated upon into 1.3425 but confirmed into 1.3450 and 1.3500. Looking ahead, Bernanke comments are set to kick-off the North American session (13:20 GMT) followed by some more ECB Liikanen comments (due around 13:30 GMT) before the 14:00 GMT unveiling of US Leading Indicators.
Wednesday, March 21, 2007
US TECHS: S&P Closes Above 38% Retracement Resistance
Yesterday's fairly strong close in the June S&P closed above the 38% retracement (1415) of the recent pullback and that is a good indication that the probability of a bear-flag pattern developing is much lower.
It puts the focus on the possibility of a double bottom pattern developing although that pattern needs confirmation and that requires a daily close above the intervening high at 1427.
Not much is expected for most of the session today as the contract will likely be in a holding pattern until the FOMC statement is released this afternoon. After that however, the market will likely be in a strong position to extend the bounce to fill in the daily gap at 1461.
It puts the focus on the possibility of a double bottom pattern developing although that pattern needs confirmation and that requires a daily close above the intervening high at 1427.
Not much is expected for most of the session today as the contract will likely be in a holding pattern until the FOMC statement is released this afternoon. After that however, the market will likely be in a strong position to extend the bounce to fill in the daily gap at 1461.
GBP/USD: Sanguine Reaction to Brown's Final UK Budget
Cable traded in a calm manner through UK Chancellor Gordon Brown's 11th and final budget, and currently resides near 1.9585 the level at which it stood into the budget. Brown's key announcement was a surprise cut in the basic rate of UK income tax to 20%, from 22%, as of April 2008 (FT website).
The pound's steady price action during the budget was in marked contrast to European morning activity. Cable ascended to 1.9650 offers in early European trade, on the back of yesterday's hawkish Barker comments. It then tumbled to a low of 1.9556 following the 09:30GMT publication of March 7/8 BoE MPC minutes detailing an 8-1 vote surprise.
The subsequent recovery rally to 1.9623 (today's Asian session top) was attributed to a perception that the minutes represent "old news" re: yesterday's UK CPI upside surprise. Today's key US event risk is the 18:15GMT FOMC statement to accompany an (expected) unchanged Fed funds rate verdict. The market is reportedly prepared for a more dovish than hawkish statement.
The pound's steady price action during the budget was in marked contrast to European morning activity. Cable ascended to 1.9650 offers in early European trade, on the back of yesterday's hawkish Barker comments. It then tumbled to a low of 1.9556 following the 09:30GMT publication of March 7/8 BoE MPC minutes detailing an 8-1 vote surprise.
The subsequent recovery rally to 1.9623 (today's Asian session top) was attributed to a perception that the minutes represent "old news" re: yesterday's UK CPI upside surprise. Today's key US event risk is the 18:15GMT FOMC statement to accompany an (expected) unchanged Fed funds rate verdict. The market is reportedly prepared for a more dovish than hawkish statement.
USD/JPY: Makes Gradual Upside Progress
USD/JPY makes gradual upside progress, trading up to a 117.94 high. Standing offers at 118.00 continue to restrict further gains. Movement is tentative ahead of the FOMC announcement and press conference due after the European close. A move above 118.00 would bring 118.10/15 stops in play, although the information is considered reliable that selling interest is considerable between 118.00 and 118.30.
For the technical watchers, the 118.30 level is an Ichimoku cloud base and a break through this level could fuel some stop loss activity. Further offers are said to lie at 118.35/40 and at the May 12th swing high at 118.50.
For the technical watchers, the 118.30 level is an Ichimoku cloud base and a break through this level could fuel some stop loss activity. Further offers are said to lie at 118.35/40 and at the May 12th swing high at 118.50.
USD/CHF: Gnawing At Resistant Offers
Offers from prime U.S. names between 1.2150-55 are gradually being gnawed away as payers look to break into fresh highs. Further gains are deemed positive towards further technical resistance at 1.2190-1.2200 with stops at 05 hanging above the figure.
Sterling Outlook (21st March 2007)
Cable fell by over half-a-cent to a low of 1.9556 after the 09:30GMT MPC minutes disclosure that the UK base rate was held at 5.25% on March 8 by an 8-1 vote with lone dissenter David Blanchlower voting for a 25bp cut. Sterling has since recouped those losses, amid a perception that the minutes represent "old news" re: yesterday's UK CPI upside surprise.
GBP/USD rallied to 1.9650 offers in early European trade, as the continent absorbed last night's hawkish comments from MPC member Kate Barker. Bull targets above include 1.9674 (Feb 27 high), 1.9700, 1.9750, and 1.9800. EUR/GBP rallied to 0.6800 offers on the back of the 8-1 MPC vote shock. A 0.6800 option strike rolls off at today's NY cut (14:00GMT).
UK Chancellor Gordon Brown will deliver his 11th and final UK budget from 12:30GMT. Brown is expected to succeed Tony Blair as UK PM this summer. Today's key US event risk is the 18:15GMT FOMC statement to accompany an (expected) unchanged Fed funds rate verdict. Tomorrow's key UK event risk is the 09:30GMT unveiling of February retail sales.
GBP/USD rallied to 1.9650 offers in early European trade, as the continent absorbed last night's hawkish comments from MPC member Kate Barker. Bull targets above include 1.9674 (Feb 27 high), 1.9700, 1.9750, and 1.9800. EUR/GBP rallied to 0.6800 offers on the back of the 8-1 MPC vote shock. A 0.6800 option strike rolls off at today's NY cut (14:00GMT).
UK Chancellor Gordon Brown will deliver his 11th and final UK budget from 12:30GMT. Brown is expected to succeed Tony Blair as UK PM this summer. Today's key US event risk is the 18:15GMT FOMC statement to accompany an (expected) unchanged Fed funds rate verdict. Tomorrow's key UK event risk is the 09:30GMT unveiling of February retail sales.
Yen Outlook (21st March 2007)
JPY traded on an easier footing in quiet European trade. Volumes were light after a limited overnight session due to a Tokyo holiday. In the absence of key market moving data/events interest favoured JPY selling. USD/JPY was able to make up most of yesterday's European afternoon losses and traded up to 117.84, clearing offers between 117.40 and 117.65 in the process.
The market lacked momentum and standing interest ahead of 118.00 from exporters and option accounts capped. EUR/JPY saw a similar theme, carving out a modest rally as speculative accounts and short-term CTAs sold JPY. The cross rose to 156.78 and settled into the mid 156's ahead of the US open. JPY traders have been encouraged by the stabilisation in the global equity markets but attention is firmly on today's FOMC meeting.
Steady rates are expected, with focus on the accompanying statement. Some weakness in recent data highlights the recession risk. This coupled with ongoing sub-prime woes could undermine dollar advances. The Fed should explain how they will try to engineer a soft landing and dovish rhetoric could ensue as a result.
The market lacked momentum and standing interest ahead of 118.00 from exporters and option accounts capped. EUR/JPY saw a similar theme, carving out a modest rally as speculative accounts and short-term CTAs sold JPY. The cross rose to 156.78 and settled into the mid 156's ahead of the US open. JPY traders have been encouraged by the stabilisation in the global equity markets but attention is firmly on today's FOMC meeting.
Steady rates are expected, with focus on the accompanying statement. Some weakness in recent data highlights the recession risk. This coupled with ongoing sub-prime woes could undermine dollar advances. The Fed should explain how they will try to engineer a soft landing and dovish rhetoric could ensue as a result.
Euro Outlook (21st March 2007)
Into European action and EUR/USD was dropped back to 1.3300/05 bids on the back of the downward German Retail Sales revisions. However, bids into the figure helped prop spot and the pair soon recovered to re-test the Asian session high at 1.3320/25. 1.3275/80 is still seen as the key intraday bear trigger with C/B buyers tipped here while more bids sit at 1.3250.
Looking ahead, dealers have cited the impending FOMC rate verdict as having constricted the risk appetite from the markets in recent days. Into North American trading and there is little else to shape the event-risk profile with the calendar devoid of entries with the exception of further Paulson comments. Only the most ardent look for a move, in either direction, from Bernanke with rates expected to remain on hold at 5.25% at 18:15 GMT.
As a result, it will be the tone of official rhetoric that decides the direction for the Dollar in the short and long-term. Should the USD be sold then the attention will return to the 1.3350 option barriers and the 2006 yearly high at 1.3371 before more option barriers into the 1.3400 mark.
Looking ahead, dealers have cited the impending FOMC rate verdict as having constricted the risk appetite from the markets in recent days. Into North American trading and there is little else to shape the event-risk profile with the calendar devoid of entries with the exception of further Paulson comments. Only the most ardent look for a move, in either direction, from Bernanke with rates expected to remain on hold at 5.25% at 18:15 GMT.
As a result, it will be the tone of official rhetoric that decides the direction for the Dollar in the short and long-term. Should the USD be sold then the attention will return to the 1.3350 option barriers and the 2006 yearly high at 1.3371 before more option barriers into the 1.3400 mark.
USD/JPY: Strong Buying Emerging Ahead of 117.00
Traders have not yet identified the buyers but report aggressive buying ahead of 117.00 that has seen some players pare shorts for a bounce back to 117.27. Some dealers suspect possible Asian buying with Japanese importer demand still reported on dips lower as well. USD/JPY is testing 117.30 again, aided by US stocks gains with the DJIA up 32 pts.
Dealers also feel that the housing numbers today were very positive for the USD and are also dismissing some media speculation that the Fed will be dovish this week on subprime and housing concerns. Traders see the Fed reiterating a hawkish stance on inflation after data last week and the inflation spike seen in Canadian and UK data today.
Traders are now hearing that the USD/JPY collapse may be due to one of the "usual suspects" and not the China news or subprime rumors. Traders are now hearing that Russia once again dumped GBP/JPY after the overnight gains for the fall in the cross from 230.75 to level around 229.00. The cross has bounced back to 229.65.
Dealers also feel that the housing numbers today were very positive for the USD and are also dismissing some media speculation that the Fed will be dovish this week on subprime and housing concerns. Traders see the Fed reiterating a hawkish stance on inflation after data last week and the inflation spike seen in Canadian and UK data today.
Traders are now hearing that the USD/JPY collapse may be due to one of the "usual suspects" and not the China news or subprime rumors. Traders are now hearing that Russia once again dumped GBP/JPY after the overnight gains for the fall in the cross from 230.75 to level around 229.00. The cross has bounced back to 229.65.
USD/JPY: Real Money Sellers Keep Pressure on USD/JPY
USD/JPY is at 117.11/15 with real money sellers seen keeping pressure on the currency pair. Real money accounts were among the buyers above 117.50 yesterday. Bids remain ahead of 117.00 and again at 116.80/90. JPY crosses are mixed with AUD/JPY and EUR/JPY still probing lows.
However, NZD/JPY has bounced back to 82.40, and is often a leading indicator for carry cross performance. Note that with US stocks bouncing that the VIX has declined further today as risk falls, and is also a positive sign for carry trades.
However, NZD/JPY has bounced back to 82.40, and is often a leading indicator for carry cross performance. Note that with US stocks bouncing that the VIX has declined further today as risk falls, and is also a positive sign for carry trades.
USD/JPY: Still Offered, Ignores Rebound in Stocks
USD/JPY is still offered with the slide in the USD/JPY and JPY crosses unnerving the market. Despite a bounce in the DJIA, which is now up 27 pts, USD/JPY is trading at 117.12/17 and headed back to the 117.06 lows traded earlier. Bids remain at 117.00 and 116.80/90. EUR/JPY, unable to trade back above 156.00 where stops were triggered earlier, has dropped back to 155.72.
Bids are now reported at 155.50 that should stall the decline. US bond yields have failed to bounce despite stock gains, and this too is weighing on USD/JPY. US/JY two-year bond yield spreads have dropped back to 378 bp today from 385 bp yesterday, helping to weigh on USD/JPY. The spread is above recent lows of 374 bp however, but down from 405 bp a month ago.
Bids are now reported at 155.50 that should stall the decline. US bond yields have failed to bounce despite stock gains, and this too is weighing on USD/JPY. US/JY two-year bond yield spreads have dropped back to 378 bp today from 385 bp yesterday, helping to weigh on USD/JPY. The spread is above recent lows of 374 bp however, but down from 405 bp a month ago.
EUR/USD: Mid-Range as Fuss Dies Down
EUR/USD has settled down close to 1.3290, where it sat shortly before the subprime mortgage rumors and comments from China's Zhou circulated. Carry trade unwinding has slowed but bounces are modest as yet, helping keep a strong lid on EUR/USD rallies. Despite the earlier flurry, offers at 1.3310 held fast, dissuading longs to a significant degree.
Dealers note talk of bids layered down from the 1.3270 level to 1.3250 near-term suggesting a very quiet afternoon could play out today. Dealers can use the excuse that the Fed is meeting to justify seeking the sidelines though odds are they will not move too far from their present posture given last week's inflation data.
Dealers note talk of bids layered down from the 1.3270 level to 1.3250 near-term suggesting a very quiet afternoon could play out today. Dealers can use the excuse that the Fed is meeting to justify seeking the sidelines though odds are they will not move too far from their present posture given last week's inflation data.
USD/CHF: Bounces Off 1.2110 But 1.2150 To Cap Rebounds
Spot was sold back to 1.2110 but bids ahead of the 1.2100 level propped and the pair has since bounced. The 1.2100 strikes have also rolled off but with the market preferring to think that the PBOC head, Zhou, has been misquoted the US unit is looking to retrace its losses. Into the bounce short-term buyers have been spotted but sellers remain on several large order books to keep the topside looking limited above 1.2150.
Tuesday, March 20, 2007
US TECHS: Commodities Outlook; Gold and Oil
Daily momentum readings in [gold] bottomed out on March 15 in modestly negative territory. With higher price lows set on March 14 as compared to the March 6 floor, the market has approached 50% retracements at $663.50 Apr. 62% measures are at $670.
Given the severity of the late February decline, a brush with neutral momentum readings could accompany tests of the 62% rebound in a few days, at which point a better read of the market's recovery attempts should be possible. While the bigger picture looks good for gold, an immediate resumption of the larger advance is probably not going to occur as the market consolidates from its sizable break. 40-day moving averages are nearby at $660.50.
In [oil], the recent bearish Trend Intensity signal (from last Friday) upticked again yesterday. Risk is that the trigger on weakness near the lower end of its two-month price range will have difficulty in attracting additional follow-through selling.
Daily bear trends are intact below $59.95 May, and weekly models are set to turn bearish at week's end below $61.55 May, joining long-bearish monthly trends, a powerful combination. In other words, bears have the strong benefit of the doubt until proven otherwise, despite nagging psychological doubts that floors are close by.
Given the severity of the late February decline, a brush with neutral momentum readings could accompany tests of the 62% rebound in a few days, at which point a better read of the market's recovery attempts should be possible. While the bigger picture looks good for gold, an immediate resumption of the larger advance is probably not going to occur as the market consolidates from its sizable break. 40-day moving averages are nearby at $660.50.
In [oil], the recent bearish Trend Intensity signal (from last Friday) upticked again yesterday. Risk is that the trigger on weakness near the lower end of its two-month price range will have difficulty in attracting additional follow-through selling.
Daily bear trends are intact below $59.95 May, and weekly models are set to turn bearish at week's end below $61.55 May, joining long-bearish monthly trends, a powerful combination. In other words, bears have the strong benefit of the doubt until proven otherwise, despite nagging psychological doubts that floors are close by.
Swiss Outlook (20th March 2007)
Into Europe and German name buying forced USD/CHF to rally but selling into strength from Spec A/C's was noted ahead of the Swiss data. As a result the price stayed close to the 1.2125 session low but the near expectation Swiss price data forced a quick turn around from the speculative community. The pair bounced and US investment house offers into 1.2150/55 have tried to limit the topside.
However, trading printed 1.2160 before buying momentum waned and spot is now consolidating the move higher. Technically, a break and close above 1.2155 should alleviate any recent downward short-term pressure, according to a recent research note from a quality German name. Any such move would put a base in the pair around 1.1950/2050 in the medium-term and transfer risk to the topside.
Over in IFR, they feel that the break of the 38.2% Fibo at 1.2156 (of the sell-off from 1.2357 (March 9th) to 1.2031 (March 16th)) will be less significant than the 10-Day moving average line at 1.2191 and the 50% Fibo of the same move at 1.2194. Also above the 61.8% resistance at 1.2232 will be eyed for a full retracement.
However, trading printed 1.2160 before buying momentum waned and spot is now consolidating the move higher. Technically, a break and close above 1.2155 should alleviate any recent downward short-term pressure, according to a recent research note from a quality German name. Any such move would put a base in the pair around 1.1950/2050 in the medium-term and transfer risk to the topside.
Over in IFR, they feel that the break of the 38.2% Fibo at 1.2156 (of the sell-off from 1.2357 (March 9th) to 1.2031 (March 16th)) will be less significant than the 10-Day moving average line at 1.2191 and the 50% Fibo of the same move at 1.2194. Also above the 61.8% resistance at 1.2232 will be eyed for a full retracement.
Sterling Outlook (20th March 2007)
Cable has surged by over a cent to an 18-day peak of 1.9564, with EUR/GBP slumping by nearly half-a-penny to an eight-day low of 0.6790, since the 09:30GMT disclosure of above-forecast UK February inflation figures. Annualized CPI unexpectedly rose to 2.8%, from 2.7% in January. Annualized RPI spiked to 4.6%, with RPIX rising to 3.7%.
The firmer-than-expected numbers have increased the risk of the BoE MPC hiking the UK base rate by another 25bp to 5.5% as early as next month (Apr 5). Minutes from the March 7/8 MPC meeting will be published at 09:30GMT tomorrow. GBP/USD bull targets north of 1.9564 include 1.9600 and 1.9637. The latter level is a 61.8% Fibo retracement point of the fall from 1.9917 (Jan 23, 15-year high) to 1.9185 (March 5 low).
1.9530 is now a support point. Stops above 1.9530 were tripped en route to 1.9564. Lower props include 1.9505 (last Friday's top). Today's key US event risk is the 12:30GMT release of February housing starts and building permits. These are respectively forecast at 1.45 million and 1.55 million. MPC member Barker is due to speak later.
The firmer-than-expected numbers have increased the risk of the BoE MPC hiking the UK base rate by another 25bp to 5.5% as early as next month (Apr 5). Minutes from the March 7/8 MPC meeting will be published at 09:30GMT tomorrow. GBP/USD bull targets north of 1.9564 include 1.9600 and 1.9637. The latter level is a 61.8% Fibo retracement point of the fall from 1.9917 (Jan 23, 15-year high) to 1.9185 (March 5 low).
1.9530 is now a support point. Stops above 1.9530 were tripped en route to 1.9564. Lower props include 1.9505 (last Friday's top). Today's key US event risk is the 12:30GMT release of February housing starts and building permits. These are respectively forecast at 1.45 million and 1.55 million. MPC member Barker is due to speak later.
Yen Outlook (20th March 2007)
EUR/JPY traded on a supportive footing amid increased interest for high yielding currencies. EUR/JPY saw interest of its own, yet larger flows have been seen elsewhere, with NZD/JPY, AUD/JPY and GBP/JPY all seeing interest. Eastern European activity was seen in GBP/JPY and Japanese activity has been heavy via NZD/JPY and AUD/JPY.
EUR/JPY price action was restricted towards 157.00, with exporters and option names reportedly sitting on the offer between 157.00 and 157.25. USD/JPY drifted back towards the 118.00 handle as European players were encouraged by the broad JPY selling that went through in the Asia. Japanese demand has been prevalent, with custodial names and retail investors active. Exporter offers and option related activity capped gains, along with light selling in the JPY crosses ahead of the US open.
Focus will remain on yield into the US session, particularly with the global equity markets stabilising and BOJ Governor Fukui indicating low interest rates ahead. The US session movement may be clipped ahead of tomorrow's US FOMC announcement, with focus on possible rhetoric on the sub-prime situation.
EUR/JPY price action was restricted towards 157.00, with exporters and option names reportedly sitting on the offer between 157.00 and 157.25. USD/JPY drifted back towards the 118.00 handle as European players were encouraged by the broad JPY selling that went through in the Asia. Japanese demand has been prevalent, with custodial names and retail investors active. Exporter offers and option related activity capped gains, along with light selling in the JPY crosses ahead of the US open.
Focus will remain on yield into the US session, particularly with the global equity markets stabilising and BOJ Governor Fukui indicating low interest rates ahead. The US session movement may be clipped ahead of tomorrow's US FOMC announcement, with focus on possible rhetoric on the sub-prime situation.
Euro Outlook (20th March 2007)
Into early North American trading and the stops seen in EUR/USD below 1.3275 remain pressured but for the moment spot is holding in the low 1.3280's. EUR/GBP sales, in the wake of the UK numbers, have weighed but EUR/USD has struggled to garner any momentum of its own thus far.
However, it may be 1.3265 that is the more significant downside trigger intraday. In other news, the front-runner for the French presidential race, Sarkozy, has launched another attack on the ECB head, Tichet, after what he claims is a "radical policy shift" as the central bank attempts to battle inflation "that no longer exists". The news itself does not come as a shock but with ECB rates potentially set to rise further we are looking for political discontent to grow.
According to the latest M&A data, the Euro was the clear winner over the last week. With Imperial Tobacco Group's bid for Altadis and Schering-Plough looking to buy Organon Biotechnics inflows could be as high as USD 39.55Bln. Sterling was the worst performer with a net outflow of USD 16.33Bln.
However, it may be 1.3265 that is the more significant downside trigger intraday. In other news, the front-runner for the French presidential race, Sarkozy, has launched another attack on the ECB head, Tichet, after what he claims is a "radical policy shift" as the central bank attempts to battle inflation "that no longer exists". The news itself does not come as a shock but with ECB rates potentially set to rise further we are looking for political discontent to grow.
According to the latest M&A data, the Euro was the clear winner over the last week. With Imperial Tobacco Group's bid for Altadis and Schering-Plough looking to buy Organon Biotechnics inflows could be as high as USD 39.55Bln. Sterling was the worst performer with a net outflow of USD 16.33Bln.
Monday, March 19, 2007
EUR/USD: European Name Snaps Up Dip
Dealers note good buying by a European bank on the dip to the low 1.3290s, helping push the pair back to 1.3300. EUR/JPY is firmer in the last half hour, drifting up along with US equities which trade close to their best levels of the day. Chicago Fed manufacturing data is due up at 16:00 GMT while the NAHB sentiment survey follows at 17:00 GMT. Offers remain in the 1.3310/20 area near term.
GBP/USD: Offers Touted at 1.9475, UK Inflation Figures Tomorrow
Sell interest is noted at 1.9475 a couple of pips above the intra-day peak scaled earlier today. Further offers are flagged at 1.9490 and 1.9500/10. 1.9505 was Friday's two-week top.
1.9550 is among touted bull targets north of 1.9510/15. 1.9550 approximates to a 50% Fibo retracement point of the fall from 1.9917 (Jan 23, 15-year high) to 1.9185 (March 5 low). Sterling support points include 1.9435 (today's Asian session top), 1.9400, and 1.9381 (today's Asian session base).
March's NAHB US housing market index will be revealed at 17:00GMT. Forecast: 38, from 40 in February. Tomorrow's key UK event risk is the 09:30 disclosure of February inflation figures. Annualized CPI is forecast at 2.7%, unchanged from January.
1.9550 is among touted bull targets north of 1.9510/15. 1.9550 approximates to a 50% Fibo retracement point of the fall from 1.9917 (Jan 23, 15-year high) to 1.9185 (March 5 low). Sterling support points include 1.9435 (today's Asian session top), 1.9400, and 1.9381 (today's Asian session base).
March's NAHB US housing market index will be revealed at 17:00GMT. Forecast: 38, from 40 in February. Tomorrow's key UK event risk is the 09:30 disclosure of February inflation figures. Annualized CPI is forecast at 2.7%, unchanged from January.
USD/JPY: Real Money Buying Underpins Gains
Real money buying has underpinned the USD/JPY gains back above 117.50 aided by the rise in US stocks. Traders have confirmed heavy buying of AUD/JPY, NZD/JPY and EUR/JPY this session that has added to the bid tone of USD/JPY.
Offers on USD/JPY remain above 117.60 up to 117.85 with stops above. More offers are eyed at 117.95/00 but with further stops above 118.20. EUR/JPY is trading at 156.30, back near session highs but still under resistance at 156.40 with 156.75 and the top of the Ichimoku cloud the next target.
Offers on USD/JPY remain above 117.60 up to 117.85 with stops above. More offers are eyed at 117.95/00 but with further stops above 118.20. EUR/JPY is trading at 156.30, back near session highs but still under resistance at 156.40 with 156.75 and the top of the Ichimoku cloud the next target.
EUR/USD: German Government to Lift Growth Target in May
German institutes have been upping their growth targets the last week or two and the German government says it will raise the official forecast in May. At present, they see 2007 growth of 1.75% but most private economists expect growth in the 2.0/2.5% area this year.
EUR/USD has taken on a more offered tone of late as US equities follow Asian and European shares higher. Risk aversion is easing a bit but pessimism regarding the US economic remains rampant. For a good counter argument to US pessimism, checkout the column by Kevin Hassett of AEI, a US think-tank, on the Bloomberg website. Bids are eyed on dips still to 1.3275/80 with offers stacked up in the 1.3310/20 region. EUR/USD trades at 1.3293.
EUR/USD has taken on a more offered tone of late as US equities follow Asian and European shares higher. Risk aversion is easing a bit but pessimism regarding the US economic remains rampant. For a good counter argument to US pessimism, checkout the column by Kevin Hassett of AEI, a US think-tank, on the Bloomberg website. Bids are eyed on dips still to 1.3275/80 with offers stacked up in the 1.3310/20 region. EUR/USD trades at 1.3293.
USD/JPY: Abe Government Losing Support in the Polls
Political polls from the Nikkei and the Yomiuri have been released overnight showing that the Abe government continues to lose support with the dissatisfaction level now below the satisfaction level. In the Nikkei poll, the support level is at 43%, down from 49% at the last survey and below the 45% dissatisfaction result. In the Yomiuri survey, satisfaction fell 1.5 pts from the prior survey and is at 43.8%, 0.1% below the non-support levels of 43.9%.
The consequence of his deteriorating support is likely to see officials begin to panic ahead of the July upper house election and throw blame at the BOJ rate hikes for their fall in popularity. This will fuel more aggressive objections against the BOJ on rates, mirrored by comments last night from Cabinet Sec'y Shiozaki who said he expects Fukui to share policy goals with the government.
This will also underpin expectations that the BOJ is not likely to move on rates until after the elections in July. USD/JPY trades at 117.45/50 underpinned by cross plays but also by the firm tone in US stocks. The DJIA is up 87 pts currently. Offers remain on USD/JPY at 117.60 with stops at 117.85.
The consequence of his deteriorating support is likely to see officials begin to panic ahead of the July upper house election and throw blame at the BOJ rate hikes for their fall in popularity. This will fuel more aggressive objections against the BOJ on rates, mirrored by comments last night from Cabinet Sec'y Shiozaki who said he expects Fukui to share policy goals with the government.
This will also underpin expectations that the BOJ is not likely to move on rates until after the elections in July. USD/JPY trades at 117.45/50 underpinned by cross plays but also by the firm tone in US stocks. The DJIA is up 87 pts currently. Offers remain on USD/JPY at 117.60 with stops at 117.85.
USD/CHF: 1.21 Supporting Pullbacks On Soft NAHB Rumours
Talk of a softer than expected NAHB release and USD/CHF has eased back. However, bids into the 1.2100 area are propping the price against a deeper pullback. Below 1.2075/80 support is eyed while more sellers are camped into the 1.2150 area should the Dollar bounce on any sign of expectation-beating releases.
Elsewhere, The Franc remains consolidative on the crosses with EUR/CHF stalling have regained a 1.61 handle. GBP/CHF touched 2.3611 into the North American open but offers around the figure kept the topside limited on the initial break higher and the price is now working 2.3550/3600 on the wide.
Against the Yen, the CHF looks slightly better bid as Asian equity volatility keeps the Yen on the ropes. The rally to 97.27 failed to hold overnight but the cross has consolidated the move higher with bids into 96.80 propping the pullback.
Elsewhere, The Franc remains consolidative on the crosses with EUR/CHF stalling have regained a 1.61 handle. GBP/CHF touched 2.3611 into the North American open but offers around the figure kept the topside limited on the initial break higher and the price is now working 2.3550/3600 on the wide.
Against the Yen, the CHF looks slightly better bid as Asian equity volatility keeps the Yen on the ropes. The rally to 97.27 failed to hold overnight but the cross has consolidated the move higher with bids into 96.80 propping the pullback.
US TECHS: Commodities Outlook; Gold and Oil
[Gold] remains within the triangle pattern that has formed during most of March, moving mainly within the measured retracements (38% to 62%) of 2006 range that extend from $640 to $660. Multiple time frame trend conditions are too mixed to have great confidence on what comes next, with dailies neutral, weeklies bearish and monthlies still bullish.
Trend Intensity, IFR's proprietary indicator, has been flat since losing its bullish trend signal at the end of February. Feb 20 and 27 floors at $659-60 are resistance, also marking 40-day moving averages. Mar 9 tops are just below $660 as well; look to sell on approach.
In [oil], a new bearish Trend Intensity signal was set on Friday, the first since a weak bullish trend was indicated at the end of February that quickly failed. Weekly trends will turn bearish this week below $59.90 Apr, and monthly trends have never lost their bearish bias.
Some follow-through selling has surfaced, though hourly chart studies show some bullish divergence potential that may dampen the downside in the short run. For the record (though well out of reach), daily resistance is effective in a broad band to either side of $58 Apr today. Weekly supports are near $55.50 Apr.
Trend Intensity, IFR's proprietary indicator, has been flat since losing its bullish trend signal at the end of February. Feb 20 and 27 floors at $659-60 are resistance, also marking 40-day moving averages. Mar 9 tops are just below $660 as well; look to sell on approach.
In [oil], a new bearish Trend Intensity signal was set on Friday, the first since a weak bullish trend was indicated at the end of February that quickly failed. Weekly trends will turn bearish this week below $59.90 Apr, and monthly trends have never lost their bearish bias.
Some follow-through selling has surfaced, though hourly chart studies show some bullish divergence potential that may dampen the downside in the short run. For the record (though well out of reach), daily resistance is effective in a broad band to either side of $58 Apr today. Weekly supports are near $55.50 Apr.
EUR/USD: Buy-the-Dips Mentality at Work
Dealers are content to "buy-the-dips" so long as support in the 1.3275/80 region holds the line. The market continues to factor in a pronounced US slowdown later this year, just as they have the prior two years.
Housing remains the stress-point for USD bears with lower prices cutting off the home-equity loan spigot and retail sales and employment all to falter. Could happen, but like the last few years, most remain skeptical. The global economy remains strong and awash in liquidity.
A sustained downturn seems unlikely until liquidity conditions tighten materially. EUR/USD offers stretch up through 1.3325 near-term with more toward 1.3340/50. Options-related interest is seen on the offer toward 1.3350 and on the bid to 1.3280 as the protectors of 1.3350 barriers reload on weakness.
Housing remains the stress-point for USD bears with lower prices cutting off the home-equity loan spigot and retail sales and employment all to falter. Could happen, but like the last few years, most remain skeptical. The global economy remains strong and awash in liquidity.
A sustained downturn seems unlikely until liquidity conditions tighten materially. EUR/USD offers stretch up through 1.3325 near-term with more toward 1.3340/50. Options-related interest is seen on the offer toward 1.3350 and on the bid to 1.3280 as the protectors of 1.3350 barriers reload on weakness.
USD/JPY: Off Highs, but Bids Tipped at 117.10 and 116.80/90
USD/JPY is off the overnight highs of 117.63 and trades at 117.27 currently, easing slightly this morning as traders pare overnight longs. Bids are tipped as close as 117.10 now with further buying interest clustered around 116.80/90. Gains overnight took the market by surprise given the continued interest to repatriate ahead of the fiscal year end and in the wake of the China rate hike.
However, fresh carry trade interest is dominating with AUD/JPY, NZD/JPY and GBP/JPY buying seen overnight and with Japanese retail investors still showing heavy appetite for these trades. Offers remain above 117.60 but with stops reported above 117.85.
Japanese cash rates have edged up overnight on fiscal year demand but this appears to be having little impact on JPY with expectations of dovish comments from BOJ Fukui this evening, after the BOJ policy meeting, helping to underpin USD/JPY.
However, fresh carry trade interest is dominating with AUD/JPY, NZD/JPY and GBP/JPY buying seen overnight and with Japanese retail investors still showing heavy appetite for these trades. Offers remain above 117.60 but with stops reported above 117.85.
Japanese cash rates have edged up overnight on fiscal year demand but this appears to be having little impact on JPY with expectations of dovish comments from BOJ Fukui this evening, after the BOJ policy meeting, helping to underpin USD/JPY.
US TECHS: Bigger Picture for S&P Still Points to Another Rally
These are not easy days for equity bulls but that is usually when the best buying opportunities arise. The recent decline has avoided closing below the 38% retracement of the entire rally from last summer's lows and that is a good sign that the decline was more of a correction than the start of a major pullback. That's not to say that damage has not been done on the charts and it will still likely take a while before the market starts to move higher again.
Given the usual strength that takes place into the end of the month, a move higher will likely be on hold until the calendar approaches the end of the month into the second half of next week. The bigger picture still has the positive seasonal picture, a moderate sentiment reading and a strong price pattern in the bullish camp.
Given the usual strength that takes place into the end of the month, a move higher will likely be on hold until the calendar approaches the end of the month into the second half of next week. The bigger picture still has the positive seasonal picture, a moderate sentiment reading and a strong price pattern in the bullish camp.
Swiss Outlook (19th March 2007)
The Dollar bounced into Asian trading but it wasn't until the European entrance to the fray that the USD/CHF move higher accelerated. Spot broke into the 1.21's but US investment house offers into 1.2105/10 looked to cap. The pair consolidated as Swiss numbers were digested but the move higher soon continued as the French buyer returned.
Offers into 1.2130 are now being tested with a break above 1.2135 seen as a key topside intraday trigger. Swiss 4Q industrial production rose 8.9% on the year, with orders up 10.1% on year while elsewhere, risk aversion continues to decline. The UBS Risk Aversion Index fell to +0.11, from +0.22 seen into the tail-end of last week. Looking ahead, declining risk aversion has boosted the Dollar slightly into the new week but event-risk on the horizon could keep the US unit from strengthening further.
The FOMC meeting this week should constrain the Dollar but US rates are unlikely to finish the week any different from where they opened. Intraday and the focus is on the 16:00 GMT Chicago Fed Manf. Index (January) followed by the 17:00 GMT release of the NAHB Index (March).
Offers into 1.2130 are now being tested with a break above 1.2135 seen as a key topside intraday trigger. Swiss 4Q industrial production rose 8.9% on the year, with orders up 10.1% on year while elsewhere, risk aversion continues to decline. The UBS Risk Aversion Index fell to +0.11, from +0.22 seen into the tail-end of last week. Looking ahead, declining risk aversion has boosted the Dollar slightly into the new week but event-risk on the horizon could keep the US unit from strengthening further.
The FOMC meeting this week should constrain the Dollar but US rates are unlikely to finish the week any different from where they opened. Intraday and the focus is on the 16:00 GMT Chicago Fed Manf. Index (January) followed by the 17:00 GMT release of the NAHB Index (March).
Sterling Outlook (19th March 2007)
There are a number of potentially market-moving UK event risks this week, inclusive of tomorrow's disclosure of February inflation figures, Wednesday's publication of minutes from the March 7/8 MPC meeting, Gordon Brown's same-day budget, and Thursday's February retail sales numbers. UK CPI is forecast +2.7% y/y, unchanged from January, from an 11-year peak of 3.0% in December.
2.0% is the BoE's target level. The MPC minutes are expected to reveal that the UK base rate was held at 5.25% by a 7-2 vote, with Besley and Sentence dissenting in favour of another 25bp hike. Cable ran into resistance just shy of touted offers at 1.9460 during the European morning, after tripping stops above 1.9435 (today's Asian session peak).
Friday's two-week top of 1.9505 is a resistance level north of 1.9460. Sterling support points include 1.9400 and 1.9381 (today's Asian session base). March's NAHB housing market index will be revealed at 17:00GMT. Forecast: 38, from 40 in February. This week's key US event risk is the two-day FOMC meeting, which begins tomorrow (Tuesday).
2.0% is the BoE's target level. The MPC minutes are expected to reveal that the UK base rate was held at 5.25% by a 7-2 vote, with Besley and Sentence dissenting in favour of another 25bp hike. Cable ran into resistance just shy of touted offers at 1.9460 during the European morning, after tripping stops above 1.9435 (today's Asian session peak).
Friday's two-week top of 1.9505 is a resistance level north of 1.9460. Sterling support points include 1.9400 and 1.9381 (today's Asian session base). March's NAHB housing market index will be revealed at 17:00GMT. Forecast: 38, from 40 in February. This week's key US event risk is the two-day FOMC meeting, which begins tomorrow (Tuesday).
Yen Outlook (19th March 2007)
Despite the USD/JPY topside dominating the morning session in London, a good supply of liquidity both sides of the market has kept the pair from surging away. The stops initially triggered at 117.50 have so far only managed to spike a high of 117.62 falling short of an expected 117.80 test.
Unless any major surprise is sprung at the BOJ Policy meeting, range plays are likely to hold intact. Maximum risk in the short term would suggest a spike towards 118.40 although any possible move towards this level should be countered by domestic sellers who continue to repatriate aspects of overseas holdings before term end.
Volatilities have remained static with another day of widespread expiries coming off. The main source of interest would still surround a suspected 116.00 barrier which would make Asia"s bounce from 116.26 more credible in terms of defensive bids.
Unless any major surprise is sprung at the BOJ Policy meeting, range plays are likely to hold intact. Maximum risk in the short term would suggest a spike towards 118.40 although any possible move towards this level should be countered by domestic sellers who continue to repatriate aspects of overseas holdings before term end.
Volatilities have remained static with another day of widespread expiries coming off. The main source of interest would still surround a suspected 116.00 barrier which would make Asia"s bounce from 116.26 more credible in terms of defensive bids.
Euro Outlook (19th March 2007)
Into the new week and EUR/USD eased lower in Asia after the Chinese weekend rate hike, however, it was not until early European action that the momentum increased. Stops triggered on the break below 1.3295 to fuel the descent but a "structured" official name was found on the bid into 1.3285.
This stalled the sell-off, to leave the sub-1.3280 intact, and the price bounced. However, 1.3320 sales capped the rebound to leave the downside in view. On the options front, 1.3350 barriers are key to the short-term topside but structures are also seen in place into the 2006 yearly high around 1.3370 with 1.3375 interest also touted before the next barriers at 1.3400. Looking ahead, declining risk aversion has boosted the Dollar slightly into the new week but event-risk on the horizon could keep the US unit from strengthening further.
The FOMC meeting this week should constrain the Dollar but US rates are unlikely to finish the week any different from where they opened. Intraday and the focus is on the 16:00 GMT Chicago Fed Manf. Index (January) followed by the 17:00 GMT release of the NAHB Index (March).
This stalled the sell-off, to leave the sub-1.3280 intact, and the price bounced. However, 1.3320 sales capped the rebound to leave the downside in view. On the options front, 1.3350 barriers are key to the short-term topside but structures are also seen in place into the 2006 yearly high around 1.3370 with 1.3375 interest also touted before the next barriers at 1.3400. Looking ahead, declining risk aversion has boosted the Dollar slightly into the new week but event-risk on the horizon could keep the US unit from strengthening further.
The FOMC meeting this week should constrain the Dollar but US rates are unlikely to finish the week any different from where they opened. Intraday and the focus is on the 16:00 GMT Chicago Fed Manf. Index (January) followed by the 17:00 GMT release of the NAHB Index (March).
Thursday, March 15, 2007
EUR/USD: Option Defence Under Assault From Inter-bank Traders
1.3250 exotic option barriers residing at 1.3250, with short date expiries and an investment bank name in the frame are under assault from antsy spot dealers that yearn for a topside range break. The barriers at 1.3250 are slated to be accompanied by stops at 1.3260, and the highest print was 1.3248 so far.
This seems to be a do or die effort ahead of the US Philly Fed data, and the question is simply who has the most ammo, or put another way the most to lose inter-bank or the US investment bank. Only time will tell, spot trades at 1.3246.
This seems to be a do or die effort ahead of the US Philly Fed data, and the question is simply who has the most ammo, or put another way the most to lose inter-bank or the US investment bank. Only time will tell, spot trades at 1.3246.
USD/JPY: Trend Intensity Signal Remains Neutral
The trend intensity signal for USD/JPY remains neutral and is consolidating, easing one notch to 21. The signal remains above trend-ready levels of 13 or below. The EUR/USD trend signal is neutral at 15. The GBP/USD trend signal is bearish and has stalled at 15.
The USD/CHF trend signal is neutral at 17. The EUR/JPY trend signal is neutral at 18. The EUR/GBP trend signal is bullish but has stalled at 32 for a second session and is near mature levels, of 35 and above, where trends often fail. These proprietary indicators are updated each trading day after the NY close.
The USD/CHF trend signal is neutral at 17. The EUR/JPY trend signal is neutral at 18. The EUR/GBP trend signal is bullish but has stalled at 32 for a second session and is near mature levels, of 35 and above, where trends often fail. These proprietary indicators are updated each trading day after the NY close.
USD/JPY: Still Watching US Stock Moves
USD/JPY edged back down from 117.40 to 117.15/16 as the DJIA came off its highs and then the DJIA popped back up by 15 pts, taking USD/JPY back to current levels at 117.23/26. Dealers continue to keep their eye on CNBC and the stock market charts to fuel the direction in USD/JPY and JPY crosses.
Trading is seen growing defensive however ahead of the Philly Fed release. The market is expecting a 5.0 result. EUR/JPY trades at 115.16 after reaching highs of 115.32 this morning with offers expected at 155.50 now, near the overnight highs of 155.52. Bids remain on dips to 154.60/70.
Trading is seen growing defensive however ahead of the Philly Fed release. The market is expecting a 5.0 result. EUR/JPY trades at 115.16 after reaching highs of 115.32 this morning with offers expected at 155.50 now, near the overnight highs of 155.52. Bids remain on dips to 154.60/70.
EUR/USD: Firmer As Day Traders Bow Out of European Session
EUR/USD has traded back up to 1.3230 as some of the European day traders square up at the end of their session. After trading in a 1.3205-40 range for the US session, and the initial thrust down as Chicago opened with some E200mn transacted mainly on the sell side; EUR/USD has slipped into a more sedate 1.3225-33 range, and Chicago volumes have basically halved.
With the late day trading posis squaring out, traders are paring back ahead of the Philly Fed survey, particularly as the Empire State survey seems to be presaging yet another disappointing data snap. Nonetheless, the offers in the 1.3235-40 range are supposed to be quite substantial, so the data snap needs to be well outside of expectations (IFR estimate 4.5, median 5.0) to break the markets torpor.
With the late day trading posis squaring out, traders are paring back ahead of the Philly Fed survey, particularly as the Empire State survey seems to be presaging yet another disappointing data snap. Nonetheless, the offers in the 1.3235-40 range are supposed to be quite substantial, so the data snap needs to be well outside of expectations (IFR estimate 4.5, median 5.0) to break the markets torpor.
Swiss Outlook (15th March 2007)
Ahead of the SNB rate setting verdict (13:00 GMT) and the Franc has been sold against the Dollar as the mild corrective action, on the back of the perceived stock rebound, forced USD/CHF higher. Stops were triggered on the break into the 1.22's, above 1.2205/10, before a US investment house sold into the highs at 1.2216 to cap further strength.
The SNB is widely expected to ratchet their target 3-month LIBOR band by a further 25bps. Many in the market have already priced in such a move, taking rates from 1.50/2.50% (with a mid-point of 2.00%) to 1.75/2.75% (with a mid-point of 2.25%). As a result, the hike itself may not satisfy many CHF bears as even the higher Swiss rates are still attractive enough to encourage carry interest.
Thus the attention will turn to the accompanying data and official rhetoric from Roth and Co to see if the CHF will still be used as a funding vehicle for carry trade activities in the medium-term. Into North American trading and US data will also play a part with option traders also noting expiries down at 1.2150.
The SNB is widely expected to ratchet their target 3-month LIBOR band by a further 25bps. Many in the market have already priced in such a move, taking rates from 1.50/2.50% (with a mid-point of 2.00%) to 1.75/2.75% (with a mid-point of 2.25%). As a result, the hike itself may not satisfy many CHF bears as even the higher Swiss rates are still attractive enough to encourage carry interest.
Thus the attention will turn to the accompanying data and official rhetoric from Roth and Co to see if the CHF will still be used as a funding vehicle for carry trade activities in the medium-term. Into North American trading and US data will also play a part with option traders also noting expiries down at 1.2150.
Sterling Outlook (15th March 2007)
Cable's retreat from an Asian session three-day peak of 1.9390 extended to an intra-day low of 1.9310 in early European trade, amid talk of fresh Russian selling of GBP/JPY. Highs just shy of 1.9350 have been notched on the rebound rally from 1.9310.
Yesterday's low was 1.9213. 1.9350+ resistance levels include 1.9376 (yesterday's high), 1.9390, 1.9400, 1.9434 (Monday's high), and 1.9448 (March 5 top). Stops are tipped above 1.9450.
2.7% is the median expectation of Britons re: the UK inflation rate over the coming year, according to respondents to a quarterly BoE inflation attitudes survey. 2.7% is the same number touted by respondents to the prior BoE inflation survey in November. 2.7% is also the current actual CPI level (for January).
There are a raft of potentially market-moving US data releases today, inclusive of the 12:30GMT disclosure of February producer prices, and the 13:00GMT unveiling of January TIC data. Headline PPI forecast: +0.5% m/m. Core PPI forecast: +0.2% m/m. Long-term TIC inflows of $65.0/70.0bn are forecast. The MPC's Sentance is slated to speak at 18:00GMT.
Yesterday's low was 1.9213. 1.9350+ resistance levels include 1.9376 (yesterday's high), 1.9390, 1.9400, 1.9434 (Monday's high), and 1.9448 (March 5 top). Stops are tipped above 1.9450.
2.7% is the median expectation of Britons re: the UK inflation rate over the coming year, according to respondents to a quarterly BoE inflation attitudes survey. 2.7% is the same number touted by respondents to the prior BoE inflation survey in November. 2.7% is also the current actual CPI level (for January).
There are a raft of potentially market-moving US data releases today, inclusive of the 12:30GMT disclosure of February producer prices, and the 13:00GMT unveiling of January TIC data. Headline PPI forecast: +0.5% m/m. Core PPI forecast: +0.2% m/m. Long-term TIC inflows of $65.0/70.0bn are forecast. The MPC's Sentance is slated to speak at 18:00GMT.
Yen Outlook (15th March 2007)
Large speculative flows continue to feed volatility into the Yen markets, which led to a choppy overnight session for USD/JPY. The official line remains one of denial and apathy towards the current tremors that have unsettled the financial markets. BOJ Governor, Fukui, suggested overnight that financial markets were merely adjusting and that risk reduction would not harm the real economy.
The central banker also reiterated his view that the BOJ rate hike was not responsible for the equity market moves. USD/JPY broke higher late in the Wednesday session, leading to a New York-Asia hand over at levels around 117.00. A push to 117.58 provided Japanese exporters with a good selling opportunity and the market then settled into a choppy 117.05 to 117.25 range heading into Europe.
Looking ahead, something tells that the USD will struggle to make headway while Japanese corporate interest is expected to top and tail USD/JPY. Option plays are reportedly mixed in with the importer interest on the buy side while the overnight rally reportedly cleared away a large swathe of option offers and stops. On balance a Yen buy while USD/JPY is below 117.60.
The central banker also reiterated his view that the BOJ rate hike was not responsible for the equity market moves. USD/JPY broke higher late in the Wednesday session, leading to a New York-Asia hand over at levels around 117.00. A push to 117.58 provided Japanese exporters with a good selling opportunity and the market then settled into a choppy 117.05 to 117.25 range heading into Europe.
Looking ahead, something tells that the USD will struggle to make headway while Japanese corporate interest is expected to top and tail USD/JPY. Option plays are reportedly mixed in with the importer interest on the buy side while the overnight rally reportedly cleared away a large swathe of option offers and stops. On balance a Yen buy while USD/JPY is below 117.60.
Euro Outlook (15th March 2007)
Into European trading and spot had attained a mild offered tone as the broader stock correction was seen aiding the Dollar. Trading was sold through 1.3210 bids and support into 1.3200 failed to prop also but spot bounced off 1.3195 ahead of the release of Euro Zone data.
On the topside offers into 1.3215/20 have looked to cap the rebound with more sellers 1.3240/50. Looking ahead, a plethora of US numbers are set for release into North American trading. Should the Dollar hold its corrective tone once the dust settles then the move lower will need to clear central bank bids into 1.3190, the stops below, and then the mass of buyers camped into the 1.3180 area.
Stops are also seen below, into the 1.3175 area, so traders should watch and await for any break of this level. Elsewhere, in the wake of the previous hawkish Liebscher comments a host of further hawkish rhetoric, from various ECB speakers, has helped underpin the Euro today. The main crux argument centers on the risk to Euro Zone inflation into late 2007 and early 2008.
On the topside offers into 1.3215/20 have looked to cap the rebound with more sellers 1.3240/50. Looking ahead, a plethora of US numbers are set for release into North American trading. Should the Dollar hold its corrective tone once the dust settles then the move lower will need to clear central bank bids into 1.3190, the stops below, and then the mass of buyers camped into the 1.3180 area.
Stops are also seen below, into the 1.3175 area, so traders should watch and await for any break of this level. Elsewhere, in the wake of the previous hawkish Liebscher comments a host of further hawkish rhetoric, from various ECB speakers, has helped underpin the Euro today. The main crux argument centers on the risk to Euro Zone inflation into late 2007 and early 2008.
Wednesday, March 14, 2007
EUR/USD: Approaches 1.3220 Area Again Before Stalling
EUR/USD came close to yesterday's session highs at 1.3220/225 before stalling on its most recent run. Dealers expect stops above the 1.3225 level but also note a good overhang of supply at 1.3260/70 should EUR/USD extend its rally.
Selling by US investors is rumored as risk aversion tends to prompt liquidation of overseas investments, especially as recent market weakness has been spread evenly around the global. US retail investors who were sold foreign stocks based on the notion of diversification now find the markets closely correlated. EUR/USD changes hands at 1.3214.
Selling by US investors is rumored as risk aversion tends to prompt liquidation of overseas investments, especially as recent market weakness has been spread evenly around the global. US retail investors who were sold foreign stocks based on the notion of diversification now find the markets closely correlated. EUR/USD changes hands at 1.3214.
US TECHS: Commodities Outlook; Gold and Oil
[Gold] has come to within less than $5 of retesting last week's lows with today's break. Despite weakness the past few days, inside week structure remains in place as gold stays near the low end of the nearly $60 range in place since the late February break commenced. Monthly supports are at $632.50-635.00 for Apr gold; weekly supports are a bit lower at $627-29 in the event of a larger move.
The failure to close above 40-day moving averages (now $659) at the recent corrective high on Mar 9 has also left 200-day averages at $634.50 as a target. Bottom line, don"t be surprised to see the $627-35 band tested.
In [oil], the supply data is awaited but the setup into the numbers is not too constructive following the three-day slump that preceded today's session. 40- and 50-day moving averages at $58.43-72 are now closest resistance; Apr futures appear headed towards a 50% retracement of range since prices bottomed in mid-January at $57.08 on any new selling.
Intraday, daily and weekly charts show overlapping resistance on any firm bounce in the $59.00-60.50 zone. Daily Elliott wave counts do not endorse bottom picking here, and monthly trends stay bearish below $60.80-90.
The failure to close above 40-day moving averages (now $659) at the recent corrective high on Mar 9 has also left 200-day averages at $634.50 as a target. Bottom line, don"t be surprised to see the $627-35 band tested.
In [oil], the supply data is awaited but the setup into the numbers is not too constructive following the three-day slump that preceded today's session. 40- and 50-day moving averages at $58.43-72 are now closest resistance; Apr futures appear headed towards a 50% retracement of range since prices bottomed in mid-January at $57.08 on any new selling.
Intraday, daily and weekly charts show overlapping resistance on any firm bounce in the $59.00-60.50 zone. Daily Elliott wave counts do not endorse bottom picking here, and monthly trends stay bearish below $60.80-90.
EUR/USD: Breaks North of 1.3200 after Quiet Morning
EUR/USD spent a very quiet first few hours trading between the 1.3185/95 levels as EUR/JPY buying offset any downside impetus as US stocks opened firmer. Prices have since turned lower on Wall Street and the USD has followed.
1.3220/25 offers remain rumored on rallies amid reports of barriers at 1.3225 and 1.3250. Support is seen at 1.3160 but stops are building below that level and below 1.3150. EUR/USD trades at 1.3201.
1.3220/25 offers remain rumored on rallies amid reports of barriers at 1.3225 and 1.3250. Support is seen at 1.3160 but stops are building below that level and below 1.3150. EUR/USD trades at 1.3201.
GBP/USD: Stops Above 1.9250 Tripped, Resistance at 1.9285
Tripped stops above 1.9250 have helped inflate cable to highs just shy of 1.9285 (yesterday's NY session base). Eastern European buying of GBP/JPY has been touted as a catalyst for sterling's break above 1.9250.
Stops below 1.9250 were tripped in early European trade, amid talk of Eastern European selling of GBP/JPY. Sterling resistance levels north of 1.9285 include 1.9300, 1.9321 (today's Asian session peak), 1.9355 (yesterday's high), and 1.9434 (Monday's top). Tomorrow's key UK event risk is the slated 09:30GMT publication of a BoE GfK/NOP inflation attitude survey.
Stops below 1.9250 were tripped in early European trade, amid talk of Eastern European selling of GBP/JPY. Sterling resistance levels north of 1.9285 include 1.9300, 1.9321 (today's Asian session peak), 1.9355 (yesterday's high), and 1.9434 (Monday's top). Tomorrow's key UK event risk is the slated 09:30GMT publication of a BoE GfK/NOP inflation attitude survey.
US TECHS: Bear-Flag or Double Bottom for S&P
The price pattern for June S&P on the daily chart could easily be seen as a bear-flag pattern that implies lower prices are on the horizon. For now, however, leaning towards the double bottom developing is a possibility. The driving force behind that bias is the fact that last week's bounce started from the 38% retracement support of the entire rally from the June lows.
That implies that the larger bullish trend is still the dominant pattern for the market. The danger is that the contract closes a session or two below that support level, which sits at 1371 on the cash index.
Given that the seasonals are still bullish and sentiment, in terms of the 20-day equity put/call ratio, never became overly optimistic the bigger picture still has a chance to recover nicely into the May time frame. From a much shorter time frame, if the June contract can close above the hourly swing point (1395) this morning it will start to put the building blocks in place for a better recovery.
Failure to close above there, however, almost guarantees a test of the prior low for the contract at 1384. From a risk reward perspective that would likely be a good place to try a small long as a break below would be a quick signal that the decline is more significant.
That implies that the larger bullish trend is still the dominant pattern for the market. The danger is that the contract closes a session or two below that support level, which sits at 1371 on the cash index.
Given that the seasonals are still bullish and sentiment, in terms of the 20-day equity put/call ratio, never became overly optimistic the bigger picture still has a chance to recover nicely into the May time frame. From a much shorter time frame, if the June contract can close above the hourly swing point (1395) this morning it will start to put the building blocks in place for a better recovery.
Failure to close above there, however, almost guarantees a test of the prior low for the contract at 1384. From a risk reward perspective that would likely be a good place to try a small long as a break below would be a quick signal that the decline is more significant.
Swiss Outlook (14th March 2007)
The unwinding of carry trades, in what some tip as a pre-Japanese year-end (Mar 31st) move, has helped the Swissie garner further support overnight. The CHF strengthened across the board into European trading but against a slight US unit fight back USD/CHF has managed to bounce.
Offers into 1.2175 failed to cap the rebound but sales ahead of the 1.2190 mark left the topside limited with speculation also noting Swiss name sales into the 1.2220 area in very good size with more stops seen above. Dealers also cite a host of other factors behind the underpinning of the CHF. The near 2% drop in the Dow Jones Index overnight and the impending SNB rate verdict have helped the unit stay bid across the board.
The market still prices in a 25bp hike from Roth but some remain of the opinion that a more aggressive move is not totally out of the question on Thursday. However, the recent publication of a fresh low in the March Swiss ZEW investor sentiment index has left the Franc struggling for traction into early North American trading.
Offers into 1.2175 failed to cap the rebound but sales ahead of the 1.2190 mark left the topside limited with speculation also noting Swiss name sales into the 1.2220 area in very good size with more stops seen above. Dealers also cite a host of other factors behind the underpinning of the CHF. The near 2% drop in the Dow Jones Index overnight and the impending SNB rate verdict have helped the unit stay bid across the board.
The market still prices in a 25bp hike from Roth but some remain of the opinion that a more aggressive move is not totally out of the question on Thursday. However, the recent publication of a fresh low in the March Swiss ZEW investor sentiment index has left the Franc struggling for traction into early North American trading.
Sterling Outlook (14th March 2007)
The pound came under selling pressure from the European open, re: a reduction in risk appetite on global stock market losses. EUR/GBP tripped stops above 0.6850 en route to an eight-month peak of 0.6867, with GBP/USD tripping stops below 1.9250 en route to eight-day lows circa 1.9220. 1.9250 is now a sterling resistance level.
Upper obstacles include 1.9266 (today's Asian session base), 1.9321 (today's Asian session top), and 1.9355. Bear targets south of 1.9220 include 1.9200 and 1.9185 (March 5, 15-week low). EUR/GBP exotic option barriers are located at 0.6875 and 0.6900. These are One Touch options, due to expire this summer, carrying a cumulative E9mn payout.
UK rate hawks touting another 25bp base rate hike to 5.5% either next month (April 5) or in May have elicited a boost from the 09:30GMT disclosure that annualized UK average earnings rose by an above-forecast 4.2% in the three months to January. A 4.0% increase was expected. The US Q4 current account deficit will be revealed at 12:30GMT. It is forecast at $203.0bn, from $225.6bn in Q3.
Upper obstacles include 1.9266 (today's Asian session base), 1.9321 (today's Asian session top), and 1.9355. Bear targets south of 1.9220 include 1.9200 and 1.9185 (March 5, 15-week low). EUR/GBP exotic option barriers are located at 0.6875 and 0.6900. These are One Touch options, due to expire this summer, carrying a cumulative E9mn payout.
UK rate hawks touting another 25bp base rate hike to 5.5% either next month (April 5) or in May have elicited a boost from the 09:30GMT disclosure that annualized UK average earnings rose by an above-forecast 4.2% in the three months to January. A 4.0% increase was expected. The US Q4 current account deficit will be revealed at 12:30GMT. It is forecast at $203.0bn, from $225.6bn in Q3.
Yen Outlook (14th March 2007)
JPY demand subsided in European trade as a number of Japanese accounts emerged below 116.00 in USD/JPY, while EUR/JPY found good support ahead of the 152.65 61.8% fibo support. USD/JPY fell below 116.00 to as low as 115.75 in the wake of broad equity losses linked to more negative sub-prime news. Other JPY pairs followed suit, with many anticipating further equity weakness.
The Nikkei closed over 500 points down underpinning the interest to buy JPY. Focus is expected to remain on the downside for USD/JPY and the JPY crosses, although there was a sizeable Japanese presence on dips. Bidding interest at the lows proved to be strong with Japanese importers seen buying for the month-end. Real money based activity and option related demand was noted.
Gains were limited in USD/JPY, with macro accounts and CTAs looking to sell on strength. The market will eye stops below 115.50, while EUR/JPY's 152.65 support will be pivotal. The focus for US traders will be on further developments in the sub-prime sector and whether this will have any adverse impact on US equities going forward. US data releases, include current account and import prices.
The Nikkei closed over 500 points down underpinning the interest to buy JPY. Focus is expected to remain on the downside for USD/JPY and the JPY crosses, although there was a sizeable Japanese presence on dips. Bidding interest at the lows proved to be strong with Japanese importers seen buying for the month-end. Real money based activity and option related demand was noted.
Gains were limited in USD/JPY, with macro accounts and CTAs looking to sell on strength. The market will eye stops below 115.50, while EUR/JPY's 152.65 support will be pivotal. The focus for US traders will be on further developments in the sub-prime sector and whether this will have any adverse impact on US equities going forward. US data releases, include current account and import prices.
Euro Outlook (14th March 2007)
Into European trading and EUR/USD failed to overcome the 1.3210/15 area to leave the downside open for exploration. Weak Euro Zone numbers aided the move lower but into early North American action and the stops below 1.3175 remain intact. Above it is the 1.3220/35 resistance zone that will be key to further topside actions with 1.3222 the high from yesterday while official sell orders are now seen trailing back into the low 1.3230's.
On the options front, expiries are noted at 1.3175 in decent size. US data at 12:30 GMT comes in the form of February Import and Export numbers with Q4 Current Account data also set for unveiling. Following this the only other significant event risk is Jan Transport Service numbers (15:30 GMT).
Looking ahead, central band and reserve manager bidding into 1.3155 and the stops below 1.3150 are seen as the key intraday downside triggers but should this area of support stay intact then a retest of 1.3220/35 initial resistance zone is expected with any eventual break higher eyeing a return towards the 1.3260 level then the 2007 high at 1.3296.
On the options front, expiries are noted at 1.3175 in decent size. US data at 12:30 GMT comes in the form of February Import and Export numbers with Q4 Current Account data also set for unveiling. Following this the only other significant event risk is Jan Transport Service numbers (15:30 GMT).
Looking ahead, central band and reserve manager bidding into 1.3155 and the stops below 1.3150 are seen as the key intraday downside triggers but should this area of support stay intact then a retest of 1.3220/35 initial resistance zone is expected with any eventual break higher eyeing a return towards the 1.3260 level then the 2007 high at 1.3296.
Tuesday, March 13, 2007
USD/JPY: Heavy Sales Overnight On 118, Crosses Down Too
Various factors look to have worked against USD/JPY overnight including heavy sales at the highs, lower US yields on flight to quality on subprime lending concerns and aggressive selling in some of the JPY crosses, including GBP/JPY and, to an extent, EUR/JPY. Other JPY crossesd remained supportive however with NZD/JPY in particular demand and AUD/JPY also holding its own.
USD/JPY saw a low of 117.22 overnight with recent longs having been forced to shed their positions. It seems a base of sorts looks to have developed near the low. Tokyo itself is likely to see more heated buys from Japanese importers today into the Tokyo with the pair lower by almost a yen.
That said, bulls are not ready to come back out of the closet just yet and heaviness is likely towards 118.00, a level which saw stops tripped on the way down. Initial support ahead of the overnight low is seen in the 117.40-45 area, 117.42 the early low. USD/JPY currently trades 117.55/60.
USD/JPY saw a low of 117.22 overnight with recent longs having been forced to shed their positions. It seems a base of sorts looks to have developed near the low. Tokyo itself is likely to see more heated buys from Japanese importers today into the Tokyo with the pair lower by almost a yen.
That said, bulls are not ready to come back out of the closet just yet and heaviness is likely towards 118.00, a level which saw stops tripped on the way down. Initial support ahead of the overnight low is seen in the 117.40-45 area, 117.42 the early low. USD/JPY currently trades 117.55/60.
EUR/USD: Settles around 1.3200/05 after Dip
EUR/USD washed out a few weak longs on the dip to 1.3193, dealers note, but prices have bounced back and have now settled into a range in the 1.3200/05 area. US equities and bond yields are well off their lows, helping give the USD a bit of a breather at the moment.
Further bids are eyed in the 1.3185/90 area but more small stops are eyed around 1.3180 with larger below 1.3145/50. Asian sellers helped cap gains earlier at 1.3220 and dealers fear a near-term top may be in. Bearishly divergent intraday techs are prompting some momentum-types to trim back longs, dealers report.
Further bids are eyed in the 1.3185/90 area but more small stops are eyed around 1.3180 with larger below 1.3145/50. Asian sellers helped cap gains earlier at 1.3220 and dealers fear a near-term top may be in. Bearishly divergent intraday techs are prompting some momentum-types to trim back longs, dealers report.
USD/CHF: Short-Dated Options Noted Both Here And EUR/CHF
On-going demand has been noted by option players for short-dated USD/CHF strikes. The Thursday SNB meeting combined with speculation that Roth and company might raise rates by more than 25bps has buoyed demand. 2-day interest is reported to be pricing strikes around the 1.2150 mark while 1-Week interest is centered upon 1.2100 and below prices. Spot currently trades around the 1.22 area as the Dollar consolidates its previous weakness with the intraday low now standing at 1.2273.
Offers into 1.2210/15 look to cap rebounds. Technically, the 61.8% Fibo of 1.1885 to 1.2575 (Dec 5th low to Jan 31st high) at 1.2154 was pierced on March 5th as spot spiked to 1.2110. However, the day failed to close lower or below the Fibo and as such some will still look for support to emerge into this technical support area. Below a break of the March 5th low (also the 2007 low) at 1.2110 will eye a full retracement. Against the Euro the Franc has failed to hold its gains as EUR/CHF bounced off the 10-Day moving average line (now at 1.6095).
The cross is now consolidating around the figure, working a rough 10-pip range either side, with similar option structures to the above also seen going through here. 1-Week atmf has been sold down from 5.4 to 5.2/5.7 while 1-Month is reported to have been paid up 4.0/4.1 having traded around 3.7 yesterday. Short dated strikes are reported to the 1.6000/25 area as a target with dealers also noting post-SNB expiries ranging from 1.5750 to 1.5825.
Offers into 1.2210/15 look to cap rebounds. Technically, the 61.8% Fibo of 1.1885 to 1.2575 (Dec 5th low to Jan 31st high) at 1.2154 was pierced on March 5th as spot spiked to 1.2110. However, the day failed to close lower or below the Fibo and as such some will still look for support to emerge into this technical support area. Below a break of the March 5th low (also the 2007 low) at 1.2110 will eye a full retracement. Against the Euro the Franc has failed to hold its gains as EUR/CHF bounced off the 10-Day moving average line (now at 1.6095).
The cross is now consolidating around the figure, working a rough 10-pip range either side, with similar option structures to the above also seen going through here. 1-Week atmf has been sold down from 5.4 to 5.2/5.7 while 1-Month is reported to have been paid up 4.0/4.1 having traded around 3.7 yesterday. Short dated strikes are reported to the 1.6000/25 area as a target with dealers also noting post-SNB expiries ranging from 1.5750 to 1.5825.
US TECHS: Commodities Outlook; Gold and Oil
Aside from modest penetrations at the end of last week, [gold] has not ventured much past 38% retracements of range measured from Feb 27 peaks to Mar 6 floors at $656.70. Daily RSI studies have broken the downtrend formed in the wake of recent selling, and are sticking more to bull market parameters (40-80) than those seen during bear markets (20-60). Daily momentum readings, negative since Mar 5, bottomed out last Friday, unable to make much headway on the downside.
Absent a sizable bounce, weekly trends turn bearish come Friday but monthlies are fence sitting near $652, the level that will determine whether bullish trends on that time frame are held. The higher low in place on the charts will run into resistance at $658-62. A better bounce than seen to date in this market is expected, but the late Feb sell off will not be quickly overcome.
In [oil], yesterday's break has not led to follow-through selling today, and lows set in mid-Feb have been avoided. Converging 40- and 50-day averages at $58.60 today held tests perfectly yesterday, one good sign. The exact center of range since Feb is at $59.80 Apr, the market's current price and a tough place from which to make a buy or sell decision. Having avoided a big break of multiple time frame supports in the $58.50-59.00 zone, daily resistance at $60.50 is a target.
Absent a sizable bounce, weekly trends turn bearish come Friday but monthlies are fence sitting near $652, the level that will determine whether bullish trends on that time frame are held. The higher low in place on the charts will run into resistance at $658-62. A better bounce than seen to date in this market is expected, but the late Feb sell off will not be quickly overcome.
In [oil], yesterday's break has not led to follow-through selling today, and lows set in mid-Feb have been avoided. Converging 40- and 50-day averages at $58.60 today held tests perfectly yesterday, one good sign. The exact center of range since Feb is at $59.80 Apr, the market's current price and a tough place from which to make a buy or sell decision. Having avoided a big break of multiple time frame supports in the $58.50-59.00 zone, daily resistance at $60.50 is a target.
Swiss Outlook (13th March 2007)
Speculation of a more aggressive SNB move on Thursday has kept the Franc supported today. USD/CHF worked a tight 1.2240/60 range for the majority of both the Asian and European sessions. Into North America and the downside was opened up and a run back towards 1.2210 and 1.2200 is now looked for.
However, dealers sound a note of caution that if EUR/USD fails to break above 1.3200/05 then EUR/CHF will need to break below 1.6100 to signal that further Franc strength is sustainable. US data is seen as key to the directional bias set for North American trading. Retail sales numbers for February are first up at 12:30 GMT (+0.3% expected), followed by Consumer Confidence at 14:00 GMT. Elsewhere, the latest reading of the UBS Risk Aversion Index shows it unchanged at +22.
The index has sat in so-called "risk neutral territory" since Monday as players await the next set of global indicators. The bank also noted in their research that emerging market spreads over US Treasury yields have widened and gold appreciated in USD terms while bonds outperformed stocks.
However, dealers sound a note of caution that if EUR/USD fails to break above 1.3200/05 then EUR/CHF will need to break below 1.6100 to signal that further Franc strength is sustainable. US data is seen as key to the directional bias set for North American trading. Retail sales numbers for February are first up at 12:30 GMT (+0.3% expected), followed by Consumer Confidence at 14:00 GMT. Elsewhere, the latest reading of the UBS Risk Aversion Index shows it unchanged at +22.
The index has sat in so-called "risk neutral territory" since Monday as players await the next set of global indicators. The bank also noted in their research that emerging market spreads over US Treasury yields have widened and gold appreciated in USD terms while bonds outperformed stocks.
Sterling Outlook (13th March 2007)
Demand circa 1.9275 based cable's early Europe break below 1.9293 (today's Asian session floor), as the continent absorbed the 00:01GMT disclosure that February's RICS UK house price balance fell to a nine-month low of 24. Further bids are tipped into 1.9250, with some stops touted under 1.9250. 1.9252 was yesterday's six-day low (plumbed during the NY morning).
GBP/USD pushed its recovery envelope from its early Europe lows to highs just shy of 1.9320 after the 09:30GMT unveiling of January's below-forecast UK trade deficit. 1.9331 was today's Asian session top. 1.9434 was yesterday's one-week peak (scaled late in the European morning).
News-wise: KKR is considering whether to raise its bid for Alliance Boots, following yesterday's rejection of the US-based private equity firm's GBP 9.7bn takeover approach, according to The Times. Today's key US event risk is the 12:30GMT disclosure of February retail sales. Forecast: +0.3% m/m, ex-autos +0.3% m/m. UK unemployment and earnings data will be published at 09:30GMT tomorrow.
GBP/USD pushed its recovery envelope from its early Europe lows to highs just shy of 1.9320 after the 09:30GMT unveiling of January's below-forecast UK trade deficit. 1.9331 was today's Asian session top. 1.9434 was yesterday's one-week peak (scaled late in the European morning).
News-wise: KKR is considering whether to raise its bid for Alliance Boots, following yesterday's rejection of the US-based private equity firm's GBP 9.7bn takeover approach, according to The Times. Today's key US event risk is the 12:30GMT disclosure of February retail sales. Forecast: +0.3% m/m, ex-autos +0.3% m/m. UK unemployment and earnings data will be published at 09:30GMT tomorrow.
Yen Outlook (13th March 2007)
USD/JPY and the JPY crosses traded on a heavier footing in European trade after overnight losses in the Asian equity market. There were sell-offs in a number of key pairs, with speculative JPY shorts paring back positions. Offers were heavy on the topside and this limited USD/JPY's potential to rally and EUR/JPY also struggled to rallying out of the 154.30 low.
USD/JPY bid interest from 117.25 and down to 117.00 and below but some stops are seen mixed in, just below 117.00. EUR/JPY ran into some Japanese account interest ahead of the 154.20 10-day moving average and yesterday's low. GBP/JPY which plunged yesterday on sales out of Russia looked weak after giving up the 227.00 handle overnight and traded into 226.20. NZD/JPY and AUD/JPY looked better bid, supported by Japanese retail investor interest.
The European afternoon will focus on a stream of US data, with retail sales, business inventories and a couple of sentiment indicators on the slate. US Treasury Secretary is also due to speak. All these factors are expected to influence, although the equity market and further sub-prime news will determine price action.
USD/JPY bid interest from 117.25 and down to 117.00 and below but some stops are seen mixed in, just below 117.00. EUR/JPY ran into some Japanese account interest ahead of the 154.20 10-day moving average and yesterday's low. GBP/JPY which plunged yesterday on sales out of Russia looked weak after giving up the 227.00 handle overnight and traded into 226.20. NZD/JPY and AUD/JPY looked better bid, supported by Japanese retail investor interest.
The European afternoon will focus on a stream of US data, with retail sales, business inventories and a couple of sentiment indicators on the slate. US Treasury Secretary is also due to speak. All these factors are expected to influence, although the equity market and further sub-prime news will determine price action.
Euro Outlook (13th March 2007)
Into European trading and the path of least resistance in EUR/USD was again followed. 1.3202 traded in NY yesterday but talk of exotic 1.3200 interest remained and barriers into 1.3205 are now speculated to be adding weight to the topside. 1.3196 was the traded high in Asia but spot was only working lower as European players entered the fray.
Bids into the 1.3145/55 zone were targeted by short-term accounts and spot worked as low as 1.3156 before the German data forced a bounce. The ZEW headline came in at 5.8 (against the expectations for 3.3) to force the rebound but smaller offers into the 1.3180 mark have capped the return towards the 1.32's thus far.
Looking ahead, official bidding and the stops down at 1.3145 are seen as the key intraday downside trigger but should this area of support stay intact then a retest of 1.3200 is expected with any eventual break higher eyeing a return towards the 1.3260 level then the 2007 high at 1.3296. US February retail sales data will be key to the North American direction, with economists look for a +0.3% reading.
Bids into the 1.3145/55 zone were targeted by short-term accounts and spot worked as low as 1.3156 before the German data forced a bounce. The ZEW headline came in at 5.8 (against the expectations for 3.3) to force the rebound but smaller offers into the 1.3180 mark have capped the return towards the 1.32's thus far.
Looking ahead, official bidding and the stops down at 1.3145 are seen as the key intraday downside trigger but should this area of support stay intact then a retest of 1.3200 is expected with any eventual break higher eyeing a return towards the 1.3260 level then the 2007 high at 1.3296. US February retail sales data will be key to the North American direction, with economists look for a +0.3% reading.
Monday, March 12, 2007
US TECHS: Commodities Outlook; Gold and Oil
The recovery in [gold] from the selling that commenced on February 27 has been muted, with prices starting the week lower. Bullish monthly trends shift below $652 at month's end; weekly trends (currently neutral) turn bearish at week's end just below $653. These higher time frame periods bear watching as consistency among them would provide a more conducive atmosphere in which to expect follow-through buying or selling.
As matters stand, the trends are too diffuse to have confidence of immediate strong directional activity; in addition, prices are near the exact center of the approximate $610-90 trading band in place since April, a poor spot in terms of trade location. Broader weekly support and resistance levels this week are $638-663.
In [oil], Apr futures touched 200-period moving averages precisely on hourly charts at today's $59.15 low before slipping below. Weekly bull trends were neutralized by the end of last week, and persistent monthly bear trends have not given up their defensive stance as long as prices are just below $61.
Converging 40- and 50-day moving averages near $58.50 underpin the market in the event of additional selling, coincidentally monthly pivot support as well. With weekly supports hit ($59), a break below $58.50-59.00 technically will point to high risk of hitting $56.50-57.50 this week.
As matters stand, the trends are too diffuse to have confidence of immediate strong directional activity; in addition, prices are near the exact center of the approximate $610-90 trading band in place since April, a poor spot in terms of trade location. Broader weekly support and resistance levels this week are $638-663.
In [oil], Apr futures touched 200-period moving averages precisely on hourly charts at today's $59.15 low before slipping below. Weekly bull trends were neutralized by the end of last week, and persistent monthly bear trends have not given up their defensive stance as long as prices are just below $61.
Converging 40- and 50-day moving averages near $58.50 underpin the market in the event of additional selling, coincidentally monthly pivot support as well. With weekly supports hit ($59), a break below $58.50-59.00 technically will point to high risk of hitting $56.50-57.50 this week.
GBP/USD: Runs into Resistance pre-1.9290, GBP/JPY Update
Cable has run into resistance just shy of 1.9290 after lifting off six-day lows just shy of 1.9250. Those lows were plumbed on the back of heavy GBP/JPY selling inclusive of a US fund bailing out of his long GBP/JPY position (the same player has also reportedly closed out his AUD/JPY and USD/JPY long positions).
GBP/CHF has also fallen sharply, amid reports of decent model fund selling. 1.9290 was Friday's approximate post-NFP low. Resistance levels above include 1.9307 (earlier stall point), 1.9322 (today's Asian session base), 1.9343 (Friday's pre-NFP high), 1.9359 (last Wednesday's top), 1.9380 (today's Asian session peak), and 1.9433 (late European morning, one-week high).
Looking ahead: the RICS is slated to release its February UK house price survey at 00:01GMT. The size of January's UK trade deficit will be subsequently unveiled at 09:30GMT. Tomorrow's key US event risk is the 12:30GMT disclosure of February retail sales figures.
GBP/CHF has also fallen sharply, amid reports of decent model fund selling. 1.9290 was Friday's approximate post-NFP low. Resistance levels above include 1.9307 (earlier stall point), 1.9322 (today's Asian session base), 1.9343 (Friday's pre-NFP high), 1.9359 (last Wednesday's top), 1.9380 (today's Asian session peak), and 1.9433 (late European morning, one-week high).
Looking ahead: the RICS is slated to release its February UK house price survey at 00:01GMT. The size of January's UK trade deficit will be subsequently unveiled at 09:30GMT. Tomorrow's key US event risk is the 12:30GMT disclosure of February retail sales figures.
EUR/USD: Crosses Steady; Stocks Not Buying It
US equities are not trading in orderly fashion at the open, seemingly ignoring the wave of risk aversion that has swept through currency markets in the last few hours. Much of the move appears to be flow-driven with an eastern European central bank dumping GBP/JPY with little subtlety. EUR/USD held above support at 1.3140 and is now bouncing back, trading at 1.3158. Offers remain toward 1.3180/85.
USD/CHF: 1.2250 Intact - EUR/CHF Acting As Pressure Value
Some traders report there are no stops in USD/CHF below 1.2250 while others tip a break sub-1.2250 to put spot on the path towards stop-loss city. Either way the latest stab lower in USD/CHF has sparked the pair to life with renewed buyers emerging below 1.2260 (1.2254 the low according to EBS). As a result the price is looking to bounce but selling into bounces is likely to be preferred going forward.
The impending SNB meet (Thursday) and the buying back of the Swiss Franc, amid the Countrywide and New Century Financial inspired worries, should help cap spot into 1.2280. Into North American trading and EUR/CHF has been forced to act as a pressure value to relieve the tension as EUR/USD remains capped ahead of the 1.3200 option triggers. With the Franc rallying and the Euro caged the cross has been forced lower and the option strikes at 1.6125 are fast coming into view.
The break below 1.6150 has seen stops removed but option related buying (ahead of the expiry) combined with the USD/CHF bids should help stall the move lower. Elsewhere, the expectations for an SNB hike later this week will do little to boost the Franc over the medium-term. Any such SNB hike will more than likely be followed by a further ECB rate rise therefore spreads are unlikely to be altered massively into Q2.
The impending SNB meet (Thursday) and the buying back of the Swiss Franc, amid the Countrywide and New Century Financial inspired worries, should help cap spot into 1.2280. Into North American trading and EUR/CHF has been forced to act as a pressure value to relieve the tension as EUR/USD remains capped ahead of the 1.3200 option triggers. With the Franc rallying and the Euro caged the cross has been forced lower and the option strikes at 1.6125 are fast coming into view.
The break below 1.6150 has seen stops removed but option related buying (ahead of the expiry) combined with the USD/CHF bids should help stall the move lower. Elsewhere, the expectations for an SNB hike later this week will do little to boost the Franc over the medium-term. Any such SNB hike will more than likely be followed by a further ECB rate rise therefore spreads are unlikely to be altered massively into Q2.
GBP/USD: Extends South on Fresh Selling of GBP/JPY
Another bout of GBP/JPY selling is being blamed for cable's latest tumble to six-day lows just shy of 1.9250. The name-in-the-frame re: the GBP/JPY selling is an Eastern European Central Bank. Formerly noted support points south of 1.9250 include 1.9240, 1.9230, 1.9200, and 1.9185 (last Monday's 15-week floor).
USD/JPY: Stops Tripped At 117.50, Larger Touted Under 117.10
Yen buy backs through GBP/JPY have helped shunt USD/JPY through 117.50 stops as the dollar capitulates. Rumours of larger sell stops under 117.10 and 116.90 and stops in the Sterling cross under 225.80-85 are heard
EUR/USD: Caught in Cross-Fire but Weaker
Fresh risk aversion trades are pounding the JPY crosses, but with GBP/JPY a bigger victim than EUR/JPY at the moment, EUR/GBP is buffering the EUR/USD slide. 1.3140 is next support for EUR/USD as it eases from growing resistance at 1.3185. Dealers note talk that 1.3200 barriers are linked to fresh 1.2800/1.3200 DNT plays. EUR/USD trades at 1.3153.
Swiss Outlook (12th March 2007)
Speculators were quick to buy the Franc into European trading as the impending SNB rate verdict (Thursday 15th) is expected to generate some short-term CHF strength. USD/CHF was tipped as being heavy in the 1.23's and spot was sold back from 1.2345 to 1.2320 bids in the initial European move lower.
Bids trailing back to 1.2310 helped stave off further weakness but the pair remained offered and eventually broke below 1.2300 to trip short-term stop loss orders. These have helped fuel a drop to 1.2274 and bids are now noted into the 1.2255/65 area. Into the North American open and trading is consolidating the sell-off around 1.2280 with US event-risk now seen as the next directional indicator.
In other news, Swiss M&A is in the media spotlight. State-backed telecoms group Swisscom recently launched a EUR 3.7Bln friendly takeover bid for Italian broadband operator Fastweb. British Smith & Nephew plc has agreed to buy Swiss Plus Holdings for an estimated USD 889Mln in cash while on a slightly smaller scale Swiss Sike has acquired MRT.
Bids trailing back to 1.2310 helped stave off further weakness but the pair remained offered and eventually broke below 1.2300 to trip short-term stop loss orders. These have helped fuel a drop to 1.2274 and bids are now noted into the 1.2255/65 area. Into the North American open and trading is consolidating the sell-off around 1.2280 with US event-risk now seen as the next directional indicator.
In other news, Swiss M&A is in the media spotlight. State-backed telecoms group Swisscom recently launched a EUR 3.7Bln friendly takeover bid for Italian broadband operator Fastweb. British Smith & Nephew plc has agreed to buy Swiss Plus Holdings for an estimated USD 889Mln in cash while on a slightly smaller scale Swiss Sike has acquired MRT.
Sterling Outlook (12th March 2007)
Cable rallied by half-a-cent to new one-week highs just shy of 1.9435 following the 09:30GMT disclosure of February's UK producer price data. The stronger-than-expected numbers are good news for UK rate hawks forecasting another 25bp base rate hike to 5.5% either next month or in May. Bull targets north of 1.9435 include 1.9448 (last Monday's high), 1.9460, and 1.9487.
The latter level is a 61.8% Fibo retracement point of the fall from 1.9674 (Feb 27 high) to 1.9185 (last Monday's 15-week low). 1.9398 (pre-UK PPI peak) is now a pullback support point. Lower props include 1.9380 (today's Asian session top), 1.9359, 1.9343, and 1.9322.
News-wise: the Boots board is meeting to decide whether to open up its books to Kohlberg Kravis Roberts, following Friday's GBP 9.7bn takeover approach from the US-based private equity group (BBC website). The IoD is urging UK Chancellor Gordon Brown to cut UK corporation tax from 30% to 28% in his 10th and final budget next week (March 21). Brown is expected to succeed Tony Blair as PM this summer.
The latter level is a 61.8% Fibo retracement point of the fall from 1.9674 (Feb 27 high) to 1.9185 (last Monday's 15-week low). 1.9398 (pre-UK PPI peak) is now a pullback support point. Lower props include 1.9380 (today's Asian session top), 1.9359, 1.9343, and 1.9322.
News-wise: the Boots board is meeting to decide whether to open up its books to Kohlberg Kravis Roberts, following Friday's GBP 9.7bn takeover approach from the US-based private equity group (BBC website). The IoD is urging UK Chancellor Gordon Brown to cut UK corporation tax from 30% to 28% in his 10th and final budget next week (March 21). Brown is expected to succeed Tony Blair as PM this summer.
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